As the hours go by, it becomes clear to the market that the armed operation around the dollar securities now in the hands of public bodies, and above all ANSeS, is aimed atpave the way for those who want to dollarize their investment portfolios through the market known as “cata conliquidi”.
This is why the supply of bonds will grow significantly suitable to carry out this operation and therefore – Economy expects – the upward trend of financial dollars should ease, driven by growing demand.
The intention of Economy would be to provide liquidity to the cash market – as it has done before with the repurchase of bonds – so that between now and the elections that price doesn’t get out of control. After the elections, God will say.
An important fact: Bonds started falling on Wednesday. The market has obviously interpreted that if the Treasury announces it will sell bonds, prices will go down. At what price will public bodies agree to sell their securities, knowing that on the other side of the counter awaits them a market willing to pay less and less, given the abundant supply, which has already been made public?
An experienced financier looks at the operation with diffidence and doubts the return that Economy will obtain: “Would you pay 25 for a bond that you know they want to sell 30 billion? No, with that data you already know it’s going to go down and you wait for that to happen to spend those pesos on that bond.” It is worth clarifying that the cash market with liquidity is used both for obtaining dollars and depositing them abroad and for obtaining currency to pay for imports.
The latter is no less. More and more companies are turning to this market because they have lost all hope that the Central Bank will issue foreign currency at the official exchange rate. The drought has only reaffirmed the impression that the few dollars in Central will not be enough to meet all the orders.
An important point is that importing companies turn to CCL and so when it comes to setting the prices of their products, the cost per dollar they actually paid for their imported inputs starts to weigh more and more. Key word: inflation.
Then, Economy will open a window through which dollar-denominated securities regulated by Argentine law will be sold. These bonds are traded today at 25/28% of their face value. Then buyers will buy dollar bonds with a steep discount. But they will do it by paying pesos according to the price in cash with liquid.
Today the bonds that will hit the market yield between 46 and 48%. But since they will be sold at CCL value, the real return investors would get would be around 25%. In other words, the Treasury would be indebted at a rate of 25% per annum. It is a rate of a country in default or on the verge of default. It is only possible because the market is more than willing to take pesos away from him.
At this pointthe cost of the operation, the market is divided. Those who say that the real financial cost of the operation, for the Treasury, is paying a rate of 25% argue as follows: “Let’s say that if newspapers are bought in dollars, they pay 25%. If they are bought in pesos at the official exchange rate, you need to add the gap. But I understand that FGS will sell them in the secondary market, it will do it at the MEP exchange rate (if it is domestic) or CCL (if the purchase is abroad, where I understand the government will enable the AL), with which the yield is the secondary IRR again.”
Those who argue that the cost of the operation is much higher argue this: “If the investor gets a 45% return in dollars, that’s the rate and there’s nothing else.”
The government would, in principle, have the advantage that the gap works in its favor to earn dollars. You pay $200 for dollars which in the CCL are worth almost double. With the expected devaluation occurring – according to the market – in the early days of the next government, if not sooner – the cost of earning dollars will increase.
It is worth mentioning that this administration severely punished the previous government for borrowing dollars at rates that, on average, did not exceed 7%.
Source: Clarin
