The year of the elections weighs more and more on the investment decisions of savers, beyond their capital capacity. The dollar is a variable that tends to “bite” when the polls are in sight. All the more reason this year, in which the sensation of a generalized and growing crisis prevails, a very complicated financial and monetary scenario and, moreover, the possibility of a profound change in the monetary regime.
In the market they also recognize that the “miley factor”, and his intention to dollarize (or something like that) starts to influence a little more every day in the decisions that are made around weights.
Terms like “leliq ball”, “very high interest rates” and “dollarization”. A smoothie that is difficult to digest.
The “ball of leliq” is formed with the debt that the Central Bank takes on to neutralize the surplus of pesos. It already reaches almost 14 billion pesos if passive steps are also taken. Leliqs expire every 28 days and passes every 7 days. Release that every month, the Central Bank it has to pay the interest on that $1.1 trillion debt.
This issuance of pesos, which must then be neutralized, increases every time the Central Bank raises interest rates. He did it this Monday taking them from 91% to 97% annually. Central raises rates so people stay in pesos instead of going to dollars, that’s known.
And here comes the “regime change” and the “electoral” which was mentioned above.
A financier said this to Clarions: “The problem is that at some point people, who know their fixed-term deposits are invested in Leliq, fear that the government -is or next- it is forced to restructure that debt or exchange it for longer-term bills, or some mechanism that prevents a massive withdrawal of funds. Just thinking about this possibility, while people can choose to dollarize before they fall victim to a new bonex plan”. That was a comment on the leliq ball and the fears it raises.
Now a comment from the same source on the electoral horizon. “If Javier Milei does well, it can happen that people don’t wait for a dollarization of your fixed terms shod with Leliq and we go back to the previous point: choose to dollarize first”.
With regard to this second comment, one could well say this, putting ourselves in the minds of savers: “If the dollarisationThe best thing is that it finds us dollarized before that happens”.
This is what is happening. At some point the interest rate is not enough to reverse the decisions of savers, at least those who have a free hand to do with their pesos as they please.
There are others who cannot get close to the dollar market, at least if they have any hope that the Central Bank will sell them dollars or yuan at the official rate.
Mutual funds, banks and insurers aren’t having it easy either. They are players in the financial market who are obliged to recirculate the pesos that pass through their coffers. The banks go to the Leliqs, mutual funds give life to the money market where the largest volume goes through investments in fixed-term deposits. Insurers do something similar. Everyone hooks into leliqs in one way or another.
Bankers who strive to be optimistic say that if there is a confidence regeneration, Therefore, there should be an increase in the demand for peso loans to allow banks to stop investing in Leliq to use their depositors’ pesos to finance credit lines. And so the leliq ball would be disarmed. It is an expression of desires that can be fulfilled, but its materialization is uncertain.
Rate, inflation and future dollar
The market is also looking at the impact of the monetary policy rate on inflation and dollar futures. From, Martin Mazzasenior financial advisor of Capital Hare he indicated:
“The devaluation of the official dollar has reached a 130% annual effective rate (TEA). However, futures for August are trading at 270% TEA, which shows a discrepancy between market expectations for the coming months and the devaluation of the official exchange”.
“We are closely monitoring various financial exchange rates given the movements that occurred last April. The impact on May prices remains to be seen.”
“Despite the rate hike to 97% TNA (154% TEA), the interest rate remains ineffective at finding a downward path for inflation. “
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.