After a very busy week on the market, Caputo surprised investors late Friday with the announcement of a peso-denominated debt swap to take place this week. The Minister of Economy seeks to cancel the deadlines scheduled for this year and to “kick them off” from 2025 onwards.
The race will be held in this Tuesday and will be settled next Friday. Although the announcement was not included in the minister’s timetable for this month, it comes after months of negotiations with the Treasury’s creditors, especially the banks. There are issued documents exchangeable with 54 trillion pesos, which is equivalent, at free exchange, to 54 billion dollars.
Through this operation, the Treasury aims to capture the peso instruments that expired this year and in exchange grant a basket of four new CER securities, which will mature between 2025 and 2028. The idea is to cancel principal and interest maturities this year to make reducing the financial deficit more achievable.
“Specifically it is composed of 30% of TZXD5 (December 15, 2025), 30% of TZXD6 (December 15, 2026), 25% of TZXD7 (December 15, 2027) and 15% of TZX28 (June 30, 2028))” , they explained in the PPI.
City hope that the exchange will have a positive outcome. They explain it The public sector owns 72% of the bonds entering this exchange, therefore it is guaranteed that they will “participate” in the race. Furthermore, banks are also expected to enter the exchange. We must not forget that the original draft of the Basic Law aimed at dissolving the Sustainability Guarantee Fund (FGS), 70% of whose assets are made up of debt obligations, issued in pesos and dollars.
“This places an acceptance limit of at least 60%, allowing this year’s maturities to be liquidated and, above all, ensuring the non-issuance of pesos by the BCRA and the ease of obtaining a financial surplus for this year. And the next? “It should not cause any problems if the May Pact eliminates the relaunched tax chapter of the Omnibus Law.”they said in Wise Capital.
Banks will definitely enter the stock market, so the minimum acceptance would be close to 80% and the maximum around 92%.
Although the stock market is attractive, the market’s doubts lie in the long term of the maturities. Also in the fact that the government is trying to eliminate dollar-linked and dual-dollar bonds from the scene, even if for some investors the expectation of a new rise in the exchange rate remains.
“The Treasury’s decision to set the rate at which the new instruments will be offered will impact the peso debt curve, causing BCRA claims to move up the curve (paying lower prices after the auction). We see intervention on the curve through a trade that negatively impacts the bids that the BCRA makes to support peso bond prices, regardless of whether the trade is successful or not,” they said in Aurum Valores.
The measure will allow maturities to be extended in the year in which Caputo aims to reach the financial surplus, of 60%, until 2026. Over half of the securities to be eliminated are from 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.
Caputo makes the first debt swap of the “Milei era”. Sergio Massa had previously tried to advance a similar measure, but only managed to partially extend the expiration dates until 2026.
Source: Clarin
