Due to the impossibility of borrowing abroad and the agreement with the IMF, the government has had to finance itself in recent times mainly through the placement of debt in pesos. that politics allowed to reduce emissions Central Bank currency, but it had a cost: higher interest rates and shorter maturities Given the fear of investors that the debt be restructured after the elections.
For analysts, something of this was seen in this Wednesday’s debt auction, in which the Treasury raised more than $400 billion, surpassing $107 billion in payments for the week. Half of what was captured was through a letter adjusted for inflation (Light) in June with a positive annual rate of 5.24% e higher than what the market paid forwhich made it possible to exploit the demand for hedging against the 6% monthly rise in inflation in January.
It absorbed the same figure with a fixed-rate letter (Lede) in May with a Annualized return of 118%.above the annualized inflation forecast for that period of 97%.
“We keep seeing the same thing, they place short pre PASO and pay more and more installmentsnow the CER appetite is back why it has become clear that inflation will not come down as Massa has said“, said Gabriel Caamaño, economist at Consultora Ledesma.
Debt in pesos has become one of the sensitive points of the electoral dispute, which already began in the summer, as witnessed by last week’s crossover with Together for Change. In a statement, the opposition rejected the use of peso bonds, adjusted to dollars with “unpayable” interest rates, denounced a situation of “financial fragility” and accused the government of leaving a “time bomb” to inbound management.
After the June crisis, which resulted in the withdrawal of peso bond funds and the resignation of Martín Guzmán, the Central Bank went out to buy back debt in pesos and Massa increases the “premium” for investors to place their securities. In August, Economía offered a 97% annual return on a fixed-rate bill. Since then, the gap between the interest rate paid by the Treasury and inflation expectations has widened from 6 points to almost 20 points in some cases.
“There was a clear route change starting in August, when the Treasury started offering fixed-rate bills with rates ever higher than market-expected inflation (REM),” said Juan Pablo Albornoz, an economist at the consulting firm Invecq. “When the government needs to roll over a large amount, there is no choice but to pay the rate that is worth the market,” said a market participant.
Despite the doubts sown by the opposition on the future of the debt, the Treasury has managed to renew the commitments this week with a public sector participation close to 50%, according to official calculations. The opposite is the Persistent difficulty in extending deadlines payment. On this occasion, most of what was owed was only renewed up to four months (before PASO in August), when in September the average was 8 months.
The elections therefore appear as a barrier before which more and more deadlines pile up. By chance, more than $2.4 trillion will have to be hedged in April, so it is likely that there will be new trade. “Wednesday’s result was good, considering that it was able to attract net positive financing, instead it continues to lengthen from month to month, instead of being financed with instruments that expire beyond 2024,” said Paula Gándara, of Adcap .
Source: Clarin
