After uneventfully avoiding the latest bond auction in the midst of last week’s currency run, the government will face a big challenge with peso debt. This Wednesday you have to place securities for which the deadlines must be renewed almost 1 billion dollars, an unprecedented figure for the current administration and which represents a challenge in a context of ever shorter financing terms and greater tensions due to inflation and the dollar.
This time, no debt conversion is envisaged, like the one that in March made it possible to kick in 4.3 billion dollars until 2025. they will go straight to the race in the usual way,” they said in official despatches. There they acknowledge that they have never faced such a large amount of deadlines, but assure that “everything will be fine.”
In the market believe the Ministry of Economy could take advantage of the demand for devaluation hedging (for example, with Dollar Linked Bonds for 2024) and inflation (CER), instruments that represent almost half of the maturity. “It is true that it is a very high figure, but it is also true that there is a great deal of demand for CER Letters and Linked Dollar bonds, which is the one that matures,” explained an operator.
“Local debt in pesos looks attractive in the short term, but beyond the PASO, dollar bonds are more attractive. In the very short term, LEDEs are attractive, but beyond July, LECERs better offset the risk. For positions that want to hedge against official depreciation, we prefer dollar link bonds over dual bonds, as the optionality of doubles is not profitable,” said a Balanz report.
The Ministry of Economy Last week it raised $227 billion and rolled over 120% of the maturities. “As a plus, the Treasury managed to avoid punctual deadlines despite an exchange rate escalation the likes of which has not occurred since mid-2020 and financial strains,” Invecq said. The other side, however, was that 84% of the financing was indexed, above all to inflation, which increases the financial cost.
And the Treasury also had to raise the interest rate. “To capture what little demand it has managed to get in non-indexed instruments, the Treasury has had to pays the rate of 132.6%. effective year, continuing the process of raising the rates. Despite this increase that the Treasury has validated (and which reopens the field at the Central), the demand for these instruments has been very low (the only LEDE it has offered has been rejected by 83%”, warned Invecq.
The latest auction therefore reflected the challenges to sustain the main financing mechanism in the face of the restriction on the use of central bank monetary assistance and foreign financing. One of them is the difficulty rolling over debt beyond the election. Last week terms were reduced from an average of 136 days in 2022 to 107 days in 2023 and 60% of that was with a Lecer expiring in July, before PASO.
In this framework, the economy could resort to the help of the public sector. The official banks, the provinces and the FGS of ANSeS have previously contributed to the “cushion”, but it is not clear how much margin they will have this time. According to PPI calculations, over 90% of maturities are in the hands of the private sector, Thus, key players will be private banks, mutual funds and insurance companies, whose funds have been heavier surrounded by equities this week.
Source: Clarin
