The government has started to talk turbulence which make it difficult to obtain a loan from foreign banks and funds. On the market, they argue that falling dollar bonds and rising overseas rates make the cost that will have to be paid to access a more expensive repo credit of more than US$1,000 million for one year, to bolster reserves and improve the financial climate.
Dollar stocks closed down as much as 2.5% this Monday and have accumulated a setback of up to 10% so far this month. For example, the GD30, although it closed near neutral today at $34.40, it lost 8% in February after the sharp rise in January. This bond is one of the workhorses that Sergio Massa has chosen to repurchase the debt and that the banks take as a guarantee.
In Economics they value him for every dollar they receive from the repo, they have to provide double the amount in bonds as collateral at face value. Thus, given the current price, the government would have to deliver US$4,000 million in securities to raise US$1,000 million in funds, according to private calculations. And if stocks continue to depreciate, collateral activity needs to be higher.
“Falling bonds raise the cost and they have to put more bonds as collateral,” said a former central bank official. At a private bank, they agreed that “the lower the price of bonds, the greater the need for collateral to bring in new dollars.” Although the banks offered him $2.5 billion, Massa you don’t have enough bonds to buy that amount of dollars.
Not even with the $1,000 million debt repurchase announced last January, a difficult goal that involves sacrificing reserves. The economy notified days ago of its intention to save another 100 million dollars, but this Monday bought “very little”, according to official sources. Therefore, the government has made it known that it is seeking a more modest loan than it aspired to last year.
In the last few hours, close to the minister they have slipped that it is “imminent” a first repo and that there are 7 offers. In addition to an institution Asian company, a New York entity, a large investment fund and a European bankthree more proposals were added last week, which is seen by the market as an attempt to overcome the new hurdles. “Mass Defines”they clarify in their environment.
The Minister of Economy announced this Monday that “today, tomorrow and the day after tomorrow” will announce “strong” measures in fiscal matters, the accumulation of reserves and the “defense” of the value of Argentine sovereign debt. In the midst of the rise in country risk to 1,964 points, the Palacio de Hacienda acknowledges that there will be news on the loan “when it is a little more advanced”.
Even if dollar bonds remain at 20% more than last year, specialists believe that the cost of a credit “repurchase agreement” (repo) will be very high. “In the repo they lend you 50% of the market price of the bond, in this case they lend you 8% less and eventually, as rates have gone up, they will also raise it for the repo,” another former official said. .
Gustavo Neffa, of Research for Traders, underlined that “in January there was a violent rise in the short tranche of debt, and above all foreign law securities, some information has leaked, with which we have the large rise that was anticipated, what we are seeing is a purification of prices and not even a repo can raise short-term securities”.
The other side of the repo is the increase in dollar debt. If $3,000 million of par value bonds are delivered (to obtain $1,000 million in cash), the stock of privately held dollar debt will increase by nearly 3.5% (assuming no collateral is required), and if $6,000 million is delivered (assuming a maximum guarantee of 100%), the debt will increase by 6.7%, according to Aurum calculations.
Source: Clarin
