The debt swap, criticized by the opposition and supported by the banks, has some nuances for the market. For now, this Monday Argentine assets responded with hikes and local debt instruments ended up with mixed results.
“This agreement deactivates the bomb idea that some want to plant, clarifies the uncertainty in the 2023 deadlines and serves as the basis for other agreements to improve the level of access to credit for citizens, which means more investment in the economy “, remarked the Minister of Economy, Sergio Massa after the announcement that came after weeks of negotiations with the institutions.
The market is cautiously following the proposed conversion of “voluntary government”, although many are in agreement “just kick the problem forward.”
In the banking sector, Carlos Heller, president of Banco Credicoop, spoke when asked by clarion:”This swap improves the debt profile, it does not increase or decrease the debt level. The government did not include any special conditions, they were already in the very instruments that were being sought to trade. This serves to sort the macro forward and avoid the guesswork of several monthly auctions where there is speculation about whether or not the Treasury will be able to refinance its balances.”
Instead, market analysts are more cautious. “The really relevant deadlines for the exchange with which the government wants to advance and rejects the opposition are the deadlines with private companies. The amount involved, when looking at maturities through June, we estimate at $4.6 trillion. Of that figure, $1.6 trillion is concentrated in banks and $0.4 trillion in insurance companies,” said Pablo Repetto, of Aurum Valores.
“If the banks go ahead with a 50% swap of their holdings as reported and the insurance companies do the same $1 trillion in maturities would be settled“, added Repetto, who clarified: “once the exchange is executed, $10,000 million would remain to be accrued privately. And in a few months with the current renewal term plus the rates they pay you you will find yourself in the same problem again”.
In addition to public complaints, the opposition has marked their strong refusal: “It’s a gun to the head of the next government”. Although the minister has insisted on the fact that this provision serves to “put order” in the financial system, the municipality is cautious.
“We don’t think this attempt to ‘fix’ the weight problem was what was expected and it would be a way to soften the issuance for the repurchase of securities in the secondary market“PPI analysts said, acknowledging. ‘We’re also not particularly optimistic about its outcome.’
For his part, Javier Timmermann, partner of Adcap Grupo Financiero, said: “We have a very important challenge due to our lack of credibility. The measures do not generate positive expectations abroad.” At the same time, he added: “Let’s turn the drama down and think about sustainable measures over time. We maintain the idea that debt in pesos must not default”.
Source: Clarin
