The contents of the Decree of Necessity and Urgency signed by the President of the Nation and by the entire national cabinet formalized the implementation of an operation of exchange and sale of the securities which are now in the hands of various public bodies.
The purpose of the Ministry of Economy is obtain the necessary pesos to cover the 2023 financial program. It’s not a small figure: this year’s fiscal hole, mainly due to drought, could come 4 trillion pesos, as calculated by the economist Rodolfo Santangelo, an amount equal to about 2.5 points of GDP.
The move devised by Economy is to force Anses -above all- and the rest of the organizations to liquidate their holdings in dollar bonds under Argentine law (Bonar). selling them in pesos in the secondary market. And with those pesos, you subscribe to a new bond that the Treasury will issue.
The economy then claims that the financing it needs comes from the market and not through the central bank’s monetary issuance.
The bonds that will come to market, through offers, auctions or perhaps direct sales, Today they are trading on the floor. As of close of business on Thursday 23 March, they were trading between From 23 to 26 dollars, depending on the type of bonus (see infographic). The prices reflect very low parities and this is why the market assigns a very high price to these cards. possibility that they need to be refurbished (at best voluntarily), at some point in the next government.
But prices and parities show something else: whoever buys Bonar today gets a return – a rate of return – of From 27% to 53% per year depending on the bond in question: the highest yield is offered by the shorter bonds and the lowest by the longer ones. This is the rate the Treasury will have to pay to borrow.
So far, prices, parities and rates of return. Borrowing at those rates already is scandalous. But maybe that won’t happen. Because there is another fundamental question. Will there really be market demand for the purchase of dollar bonds issued by the Republic of Argentina? We recall: these are bonds which, due to their rate of return, They should display as a black octagon that says “High chance by default”.
Also, for the market to work “counted with settlement” -now the Government wants there to be more liquidity- someone has to buy, with pesos, the bond that Anses is about to sell. But that same buyer will turn around and You will need someone to buy you the same bond but pay you in dollars. Will there be many people willing to increase their exposure to Argentine risk in their investment portfolios? Very regrettable.
In the market they anticipate it there is not much enthusiasm buy bonds, at least now, knowing that sell orders will increase significantly. How is logic, when there are many more sell orders than buy orders, prices go down. At what price would they have to fall for the rightful buyers, i.e. the market, to appear?
What financial operators imagine is that the first to appear, who knows at what price, will be the banks that they will turn around and sell it to the Central Bank. Something similar to what has been happening since June last year, when the Central appeared on the secondary market for “sustain the peso debt interest rate curve”. The monetary body has given more and more facilities to the financial system to support it: from the integration of reserve requirements with bonds and bills to the permission to pay dividends to shareholders. And with the latest exchange, buy-back insurance.
So the sequence that the market visualizes is this: Ans will sell at a certain price. Then, with the pesos received, he will subscribe to the new bond in pesos that the Treasury will issue him. The Treasury receives pesos there to finance the expenditure.
The Central Bank, for its part, must buy the securities on the secondary market because it cannot participate in the auctions.
“A handrail of documents will be set up, but in the end it will be the Central Bank that will give the weights,” he said clarion the economist Rodolfo Santangelo.
For Carlos Melconian’s partner, there is no possibility that the market will finance the treasury with the pesos it lacks to finance spending. And logically, if the plant does, the only thing you can expect is more inflation.
The price index began to accelerate in June last year, when the BCRA had to intervene in the bond market to overcome the collapse that occurred in those days, which ended weeks later with the departure of Martín Guzmán from the Ministry of Economy .
Source: Clarin
