In a strong bet on a reduction in inflation and the progressive abandonment of the exchange rate In the second half of the year, the government will launch this Monday and Tuesday the largest peso debt swap in Argentina’s memorya key test whose result will be known on Friday and aims to clarify payments of $54 billion through 2028, the equivalent of 95% of the deadlines scheduled for 2024.
The request was announced at the end of the round on Friday, although negotiations with private banks began in January. The goal of the Ministry of Economy is to take Badlar fixed rate and inflation-adjustable (CER), official dollar (linked dollar) and dual (the best outcome among the previous options) Treasury bonds that expire this year and issue new bonds linked to prices (Boncer) for 2025, 2026, 2027 and 2028.
The measure will allow the deadlines hoped for by Caputo to be extended by one year achieve a financial surplus, 60% until 2026. More than half of the titles to be eliminated are in the public sector. The Central Bank purchased part of it in 2022 and 2023 to indirectly finance the Treasury. Since the BCRA cannot participate in the primary auctions of the Economy, the way to renew the deadlines is with an exchange.
In this context, the Government asks get rid of all obligations with “exchange insurance”“(linked and dual), which represent half of the eligible basket (28 billion dollars), while the rest are CERs (26 billion dollars), according to economist Salvador Vitelli. In this way, without maturities subject to the rate of official devaluation, Caputo will have fewer restrictions to leave the shares in the middle of the year, as Javier Milei intends.
“The exchange should have good acceptance by public organizations and banks, being more uncertain than other market players. If successful, it not only allows you to extend terms, but is a step forward in facilitating exits from stocks,” explained one trader. “Exits from stocks in reasonable patterns are floaters or dirty floaters, that’s why he wants debt that doesn’t adjust to the exchange rate,” said Martin Salvo, BIND’s chief investment officer.
What the market is looking at is private sector participation. The Ministry of Finance, chaired by Pablo Quirno, has just delivered to the banks around 11 billion dollars in put options, a sort of insurance with which the institution undertakes to buy the bonds in the event of a drop in their price. It is not yet clear how much of the eligible bonds are subject to puts and whether the BCRA will maintain the benefit for those entering the exchange.
On the other hand, some investors note that the temporary interest in dollar-linked bonds has been lost and that the rates offered by the Treasury with the new CER bonds (between -3.9% in 2025 and 1.39% in 2027 ) are in line with the market. “It’s not about making money, it’s about losing as little as possible, Argentina’s average real rate over the period 2004-2015 should be close to -5% average in monetary policy terms, -1% is not that bad,” Salvo assured.
With inflation in February around 15%, the market could find a recovery incentive to redeem bonuses, since at their maturity they will not get similar returns to place the pesos while stocks continue, the liquefaction of the local currency caused by negative rates (below the CPI) continues and the government manages to reduce the financial surplus, which means it would reduce the need to finance spending by issuing debt in pesos.
This is one of the main objectives agreed with the IMF. The agency also expects Caputo to proceed with the progressive replacement of dollar- and inflation-adjusted securities with fixed-rate ones; the brake on BCRA financing to the public sector and the elimination of puts. Debt swaps, something that has the approval of the IMF, would contribute to some of these goals, decompressing fiscal bills in the near term and an eventual rate cut.
“What they are trying to do is get a good result, show that they are decompressing the maturities and allowing the Central Bank to roll them over, they have a high floor for all the securities bought by the BCRA and probably something else that they get privately than that which expires in the first half of the year,” said Gabriel Camaño, economist at the consultancy firm Ledesma.
Source: Clarin
