Sell-off causes CER bonds to collapse What are investors afraid of?

Despite the certainty that inflation will remain high for the rest of the yearinvestors seem to be escaping index-linked pesos bonds. Thus, those who were the protagonists of the local market in the first months of the year present strong drops so far this month, exceeding 17%.

a combination of Rumors of a new redefinition of debt in pesos, tax hikes and key player exit from the market in local currency prompted investors this Wednesday to unwind their positions and index-linked stocks tumbled along the entire curve. Most impressed, with The falls of more than 10% were those that expire after the end of the mandate of Alberto Fernández, at the end of 2023.

Several factors combine in this new dynamic of the local market, but one certainty: index-linked debt represents a “ball of weights“and the market is wary of the Government’s solvency in order to be able to face the deadlines: Until December of this year alone 3,250,800 million dollars are due; while between now and August 2023 approximately 5,694,700 million dollars are owed.

“The market sees the size of the pesos debt as unsustainable and that is why the risk of reshaping the pesos debt is present today. Lacunza’s record is not good: if macrism has restructured its debt into pesos, the fear that this government may default is high, “an operator told this newspaper.

In addition to the risk of default, several rumors hit index-linked debt on Wednesday. “They say they are banks disarming positions, to anticipate a new government provision that invites them not so ‘voluntarily’ to increase their renewal rate in the next tenders. It is also speculated that international funds could come out of bonds indexed in pesos “.

Economist Juan Manuel Franco, of the SBS Group, said: “Part of it can be explained by the ‘seasonality’ in the treasury payments that they may have sold to place at a safer rate until pay Christmas bonuses and those typical June or December expensesand, something that has been seen a little for a few wheels “.

Despite the shock this Wednesday, the collapse of CER bonds is not a matter of a day. Since the beginning of June, index-linked stocks have accumulated reds of more than 17%. For Consultatio analyst Tomás Ruiz Palacios, the disarmament of CER positions began in April, deepened in May and became more evident in the last few rounds.

“Prices returned to what was seen in early 2020. before the normalization of the curve in pesos that this government had to face. But these stressful movements had already been seen in the past two years. The last was in September 2021, in the midst of the government crisis that Fernández went through, “she explained.

For weeks now the market has been warning of the difficulty that the Treasury is finding in getting into debt with maturities closer to the STEP expected for next year. In the latest debt auction, only 9% of investors bought bonds maturing in 2023. The city analysts speak of “a wall” that Guzmán will have to overcome in order to continue with his financing plan in the internal market.

For this reason, all eyes are on the next debt auction, scheduled for next Tuesday, where investors should ask for a higher rate to continue financing the government with public bonds.

What is striking is that, despite this collapse of the debt in pesos, which has also reached non-indexed securities, there have been no significant movements in the foreign exchange market. This Wednesday the blue dollar was only $ 2 to $ 208, but the rise in financial dollars was barely noticeable.

Where do the pesos that come out of the bond market go? Ruiz Palacios said: “We believe investors are turning to highly liquid money market bonds, awaiting definitions in the landscape.”

In this sense, Cohen’s analysts explain: “The short-term uncertainty can lead to an increase in exposure to dollarized instruments, even more so if one takes into account the tightening of securities in some items, which increases demand. financial dollars. However, with inflation far from under control, we think it prudent to be exposed to bonds and bills of exchange that can hedge us. ”