Peso Debt: Economy Placed Over $400,000 Million With Help Of Inflation-Linked Bond

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The government passed a major test this Wednesday by placing more than $400,000 million in first peso debt auction of the month. Thus, he covered the week’s maturities, close to 300,000 million dollars, with the help of a stock adjusted for inflation and a slight rate hike, which made it possible to capture the demand for hedging against the acceleration in prices.

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The Ministry of Economy received 1,565 offers with a total nominal value of $636,834 million and more than half of that issued was absorbed by the adaptable letter (CER), reflecting the increased appetite of funds and banks for that instrument after it it was known. Tuesday the 6% increase in the CPI for January, almost 1 point above December.

“High-frequency surveys already predicted that January inflation data would be higher than in previous months. As a result, demand for inflation-adjustable instruments has recovered and only 38.1% of total funds raised on this occasion was earmarked for fixed rate instruments, a significant change from previous tenders,” PPI said.

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The menu included four securities, mostly with terms not exceeding four months (with the exception of one instrument in November 2027 for banks). Despite the difficulty of extending deadlines beyond the election, The economy was built up with an extra cushion of $107,000 million, which will help finance spending.

This is one of the targets verified by the IMF mission which was in the country as of Monday. “Net funding is positive, first quarter the deficit will be higher than usual, the floating debt data for December is skyrocketing, meaning those expenses that accrue and go unpaid are sure to be paid in these months,” said Lucio Garay Méndez, an analyst at EcoGo.

The government’s financial strategy had raised questions after the opposition denounced the alleged “bomb” that the Frente de Todos would leave to the incoming management, added to the comings and goings of the Central Bank to contain the rise of financial dollars, as well as to inflationary pressures and the bailouts of Mutual Investment Funds.

In the midst of these tensions, the Treasury had to validate a rate adjustment in line with market levels. For example, the discounted bill (LEDE) as at 31 May, which had been auctioned on 21 January at an annual effective rate of 112.5%, was auctioned at 118.1% on this occasion, denoting a exceed 558 basis points, according to PPI estimates.

The auction mattered less than 50% public sector participationaccording to official calculations.

Source: Clarin

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