For six months now, the stock of private peso deposits in banks has not stopped decreasing. The electoral uncertainty inaugurated in the PASO in August, the inflationary acceleration and the demand fordollarization played their part until December and since the arrival of Javier Milei at the Casa Rosada the dynamics changed with devaluation and rates, but with the bleeding of pesos in the banks has not relented.
In January, the Fixed-term placements represented almost 56% less than what was recorded in the first month of 2023. THE savers’ flight from banks is accompanied by a decline in total deposits. “Deposits fell by 2.9% real monthly in January, implying an annualized contraction of 32.4% in real terms. Domestically, demand deposits grew by 4.6% real monthly, a decline of 8.3% real per year”, they underlined in LCG.
The current dynamic of declining peso deposits is part of a monetary policy targeting limit the issuance of pesos, absorb the surplus to clean up the Central Bank’s balance sheet and stop inflation. “Net issuance remains high, with $15 billion issued in almost 2 months, but a major effort has been made to reabsorb at least $9 billion. This has left a net issuance of almost $6 billion that has been practically sterilized in its entirety”, they explained. in fund manager MegaQM.
The lowering of rates granted by the Central Bank discourages the placement of fixed terms both from the point of view of the depositor, who must leave “frozen” for 30 days your pesos in banks to earn a performance that largely loses with monthly inflation; as well as financial institutions, which no longer have the incentive to collect pesos to place them in leliq.
At a time when it seems that in the local market “there’s no place to hide” of inflationary acceleration, investors and savers shift their positions to try not to lose so much of their purchasing power.”This The face of the local financial system has changed, where fixed-term deposits are losing ground at a high rate and mutual funds have gained relative weight.“, they indicated in MegaQM.
In mid-2023, before the start of Argentina’s election period, fixed-term loans accounted for 52% of total pesos in banks, and that level has dropped to the 40% they currently occupy. In parallel, The mutual fund industry has gone from capturing 37% of total deposits six months ago to 60% in these days.
Argentinians give priority to liquidity and sector data proves it: 60% of the funds managed by FCIs in Argentina correspond to the so-called cash management, which includes those that give daily returns (money market) and which have been popularized by investment portfolios such as Mercado Pago, and T+1 funds, which provide returns one day after placement.
“This led to The FCI industry is the main depositor of the financial system with 30.4% of total deposits in pesos (public plus private) and with 45% of sight deposits”, they specified in MegaQM.
“These figures denote the search by investors to obtain a higher return for their peso holdings, especially for the institutional or corporate section. This has supercharged demand for shorter rate instruments, arbitraging and equalizing returns in the sections shorts of the main curves, such as the fixed rate, CER, among others,” they added.
To complete the picture we cannot ignore the drop in wages in real terms: In December they lost 14 points relative to inflation, a drop they hadn’t seen since the 2002 crisis. Finally, we must add to the demand fordollarization that remains latent: this year the financial dollar has appreciated by more than 26%. Although lagging inflation, the increase demonstrates the need to hedge a market anticipating another devaluation correction in the short to medium term.
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Source: Clarin
