Government changes complicate outlook for debt

In a bearish context such as that experienced by Argentine dollar bonds, which week after week manage to mark new lows, the accelerated departure of former Production Minister Matías Kulfas last weekend creates a new level of doubt for investors in this regard. Market analysts have warned that tension within the government could result in greater pressure on the currency market and greater caution in the debt sector.

As of Friday, country risk managed to break the 1,900 point barrier, closing around 1,893 units. However, in City they believe it since this Monday Greater uncertainty about the management of the Argentine economy could cause further declines in the prices of government bonds in foreign currencies and this underlies a new upward trend of the indicator measured by the bank JP Morgan.

On Saturday, after a series of cross-accusations on Twitter, President Alberto Fernández asked his Minister of Production, Matias Kulfas, to leave. Although his counterpart at the Palacio de Hacienda, Martín Guzmán, has been ratified in his position, the escalation of the interior of the government feeds investor fears.

FMyA economist Fernando Marull said: “The novel about Kulfas’ departure is something negative for the markets. We should see some kind of impact on bonds and also on the dollar. There was more tension within the government and it shows that Cristina Kirchner has the pen and that, given that there is a year and a half to go to this mandate, she adds more risk for investors“.

In this sense, Pablo Repetto, Head of Research at Aurum Valores, underlined: “The departure of Kulfas and the incorporation of Scioli in principle would not change the vision of the market too much. If a pure Kirchnerista had entered Scioli’s place.” “, the situation would have been much worse for Fernandez, in any case that he had to part with a person so close to him questions the continuity of the other ministers“.

At this point all the eyes of the market are focused on the figure of Martín Guzmán: “The question that arises is whether there will be a greater risk to its continuity, and in this context the problem is with the fear of what can happen with the pesos debt. Debt that, beyond the continuity or otherwise of Guzmán, generates great uncertainty “, said Repetto.

In recent weeks, the market punishment for dollar bonds has also come for pesos and instruments qualifications linked to the ERC, who was the investment star this year, he quickly began to lose his luster. Last month, the profit from this type of placement was just 2%, far behind the rise in financial dollars or the performance of a traditional fixed term.

“The deepening of the deterioration of the CER curve in the first days of June has rekindled fears about the dynamics of the debt in pesos”, say the analysts of Consultatio. “If we pay attention to the data, we see itThe adjustment actually started in late April and became particularly noticeable in May“, they warned.

Political noise could also affect the relative calm of the currency market. The blue dollar fell to $ 205 on Friday, trading $ 1 lower than at the end of 2021. The liquid dollar also closed lower at $ 209.64. The prospect, facing the second half of the year, is that the exchange rate scenario will become more complicated for the government.

“As happened in 2020 and 2021, we think that in the second half of the year there will be a discussion about whether to opt for a sharp devaluation, a split or a tightening of the securities. We imagine that, as in recent years, the Government can do everything to avoid the first path, “the consulting firm of 1816 warned in a report for its clients.