The collapse of inflation-linked bonds continues and the Central Bank goes to buy debt to stop the decline

The sharp drops experienced by inflation-linked bonds the previous day extended Thursday and since opening, CER publications have experienced decreases that have exceeded 8%, although after noon they moderated the sangria a bit. The negative effect is transferred to other government bonds in pesos and almost all of the curve operates in the red.

Citizen traders indicated that after the crashes, the central bank went out to buy index-linked debt put a “minimum” on prices.

A set of rumors and fears explains the sharp decline in recent days, even if the decommissioning of the instruments, which were protagonists of the local market in the first half of the year, began several weeks ago. In the last month, more than $ 31,000 million of these titles have gone, which explains the drops of more than 23% in prices recorded so far in June.

“What started out as a sell off of bonds in pesos, relatively tidy in the past few weeks and more untidy in the past week, it turned into something else on Wednesday with very strong drops in all CER titles and complete disappearance of purchase orders on the screens “explained the economists of the consulting firm of 1816 in a report for their clients.

The fear of a reprofiling of indexed debt was growing stronger. “A month and a half ago the market feared that the pesos would be restructured after the change of mandate, 15 days ago it feared that the pesos would be restructured during the presidential transition (i.e. in 2023), and yesterday some fears arose that there might be some sort of re-profiling already this year “, they added in 1816.

Mutual funds, large holders of this type of bond, They have been disarming positions for weeks. Yesterday alone there were bailouts of $ 13.393 million, but in the last month the outflows have been about 30,000 million dollars. The calm of the foreign exchange market, particularly that of financial dollars, suggests that funds with exposure to the public sector are the ones driving the sales.

A common hypothesis is that the disarms of these days have been led by the IESA, which will use those pesos for energy payments. “The main management company that made withdrawals yesterday was Pellegrini, which is linked to Banco Nación. This is why the sales flow is believed to come from organizations linked to the state,” said one operator.

According to market data, in the last 30 days the management company of Pellegrini. mutual funds of Banco Nación, nearly $ 35 billion in bailouts were recorded.

This movement would also reflect the difficulty the Central Bank has been having for weeks in buying dollars on the foreign exchange market to rebuild its reserves. In the first seven rounds of this month, the body chaired by Miguel Pesce managed to win just $ 17 million in the foreign exchange market.

Much of the pesos that left the CER curve went to highly liquid funds, known as money markets, or interest-bearing accounts in banks. Portfolio managers in the city prioritize “have the pesos available” until the image clears up.

The central bank sells dollars in the MULC and thus prevents corporate demand from putting pressure on liquidity with liquidation. According to market participants, the monetary authority went out on Wednesday to buy bonds linked to the CER to “put a cap” on the downside.

The negative effect of this perfect storm in the pesos bond market carries over to all Argentine debt securities. The noise hits dollar bonds and country risk, as measured by bank JP Morgan, rises to 2,011, the highest score since the restructuring carried out by Economy Minister Martín Guzmán in 2020.

YN