If there is one characteristic common to bankers, it is pragmatism with an eye to defending equity.
And if there’s one principle for a country’s Treasury Secretary, it’s that debts should not be paid and cancelled, but refinanced.
These two principles will intertwine in the conversion of debt into pesos that Minister Sergio Massa has finished negotiating with public and private bankers to move the Treasury bills maturing between April and September this year to 2024 and 2025.
For this voluntary exchange, Economía has presented a menu of CER-adjusted (inflation) bonds with markups ranging, depending on the duration, from 3.75% to 4.25% and dual bonds (the higher between inflation and devaluation).
The debt to be exchanged is close to 7 billion dollars and private banks say their bond holdings account for “only” 20% of the total and that the rest is in the portfolio of public banks and state agencies, mainly ANSeS.
Based on these assumptions, bankers are betting that 80% of the demand for new bonds will be directed towards those adaptable to the CER which, of course, will already have them incorporated at maturity. inflation calculated at 100% for 2023.
The launch of 100% annual inflation adjustable bonds speaks for itself of the commitment to issue pesos in the future in an already compromised context.
Fundación Capital’s weekly report stated prior to the announcement of the swap that “the $13.8 billion that is due through the end of the year“they found a sign that “the appetite of the private sector is diminishing” and that the participation “of the central bank added to that of public entities arises in a debt market with more and more captive holders”.
This outcome reduces the risk of reprofiling debt in the future, albeit with“a significant cost in terms of emissions.”
The exchange also establishes the Central Bank’s role as buyer of last resort for securities in the event of a collapse in prices, an action that has been going on for some time and on which the International Monetary Fund seems to turn a blind eye.
With this exchange, if accepted by the majority, the government would be able to overcome the financial “wall”. generated because the Treasury had borrowed more and more on shorter terms and paid more dearly.
Now it is clear that the cost to pay is in terms of rate and implicit issue it matters much less to a government that passes the ball to the one that follows with an avalanche in interest starting in the midst of 100% inflation.
Public entities will maintain the fiction of refinancing and banks will have juicier stocks in their portfolios, even if they are pesos.
Sergio Massa tries another financial move after the failure of the repurchase of the bond and the attempt to obtain 1,000 million dollars from an international bank and has already announced that differential dollars will arrive for wine and for regional economies.
All is not to devalue and keep the official dollar behind in the election year in a desperate attempt to contain an inflationary leap which, together with the impact of the huge blow of the drought, projects a very difficult 2023.
Source: Clarin
