Dual bond: the “all risk” insurance with which Sergio Massa still wants to convince the market

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The market is closely following the confirmation of a new conversion of debt into pesosafter Sergio Massa announced this afternoon that an agreement has been reached with the banks.

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This afternoon the conditions of this “voluntary exchange” coincide in the municipality, the only alternative that Sergio Massa finds to “kick” the expiry dates of securities in pesos scheduled for this year.

As the Economy Minister explained, the Treasury will offer “two baskets” of bonds to extend this year’s maturities for next year and for the next: one with inflationary bonds (CERs) and another composed of 60% CERs and 40% dual tools.

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Enough, the “dual” instruments are those that have generated more resistance in the opposition, who warned that the government will leave “a time bomb” for the administration that will succeed it after December this year. Double bonuses are kind of “all risk insurance” because in their composition they offer both hedge against a rise in inflation and against a devaluation of the peso.

These are peso instruments that offer investors such a return it is governed by the increase in the CER or the wholesale dollar, whichever performs better. Pablo Repetto, from Aurum Valores, explained: “The double bind is like a fixed term that is governed by the UVA or the change in the exchange rate, whichever gives the investor the best advantage.“.

It is not the first time that Massa has resorted to this type of instrument in order to get out of a market saturated with pesos. In August of last year, as soon as I arrived at the Palacio de Hacienda, the minister had already swapped the debt for “double-hedged” bonds, with which he had managed to kick the deadlines for this year. The rise in inflation over the past six months and the expectation that the gap will widen in the future give many sectors pause a warning sign to this extent.

Salvador Distéfano explained: “It’s the best option for the saver because it’s a win-win: win or win. There are dual instruments that expire in June, July and September 2023 and there are others that expire on February 28, 2024, always on the last day of the month. June and July dual bonds are inflation-adjusted up to that point plus a rate of 2. Those maturing in September are inflation-adjusted or wholesale dollar, whichever is higher, plus a annual rate of 2.25%.

Francisco Mattig, of Consultatio, explained: “The conditions offered are consistent with the current macro situation (100% gap, triple-digit inflation, high fiscal deficit, very low and declining net reserves, etc.). situation: the jump in credit risk that we have seen in general is from 2024, given the possibility that the elections will be won by a government whose policy is to give special treatment to local currency debt”.

The economist added: “In order not to default on debt in pesos, conditions such as dual bonds and puts must be offered. It is what it is, that is how things stand today, and this has been a long enough path of 3 years of management”.

Source: Clarin

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