The markets have given a very clear warning signal and Martín Guzmán must respond

The collapse in the price of Argentine bonds during the week was another sign of the high sensitivity mood in a depreciated market that until then believed to have found shelter in inflation-linked securities.

The CER bonds has been acting in recent months like shelter for companies, insurance companies, investment funds, banks and savers in general against the inflationary flight March April.

The other side was the Treasury which placed those CER-adjusted bonds (cost of living index) to make financing impossible to obtain in any other way and with the added fact that high demand for these bonds had pushed the interest rate to negative ground.

Thus, Martin Guzman, crushed more by their own than by othershas chosen to finance itself at the lowest possible cost, relying on idea that the yield on CER bonds would exceed the change in the dollar and, therefore, it would be a sufficient incentive to extend the funding until next year’s elections.

But Banco de la Nación’s Pellegrini fund sold bonds to raise more than $ 10,000 million and ANSES joined by divesting the CERs and that was enough to generate a sales flow which brought down the market and turned on the red lights of all the financial control bodies of the companies.

The fear of market operators is evident: the Government has generated a “mountain” of debt in pesos based on the placement of indexed securities and believe it a “re-profiling” could be around the corner. The memory of debt re-profiling is fresh and the government lacks arguments to convince it will not end repeat history.

In the short term, in addition to the Central Bank which continues to have to go out and buy bonds to put a stop to the collapse, the market is betting that Guzmán will have no choice but increase the rate interest rate of index-linked bonds for prevent a flight of pesos to a foreign exchange market that it is in the dollar counted with liquidation that the blue begins to show signs that the calm of the previous months there may be concluded.

Without a higher interest rate for pesos, the government could help stir the market just at a time when the international increase in the price of soybeans (approximately US $ 650 per tonne) began to consolidate externally, significantly increasing the forecasts for earnings in currency from previous year levels.

At the Central Bank they calculate that the liquidations in foreign currency of the agricultural sector would end up 25% in the first quarter compared to the same period of the previous year e total exports this year would exceed $ 88 billion. The dollar entry is very strong, although the exit is also strong.

The government believes they are still there $ 2 billion in the hands of the manufacturers they opt for they do not sell cereals to exporters betting on keeping them as a refuge in times of great uncertainty.

The external force provided by soy in US $ 650 and US $ 4,000 million that would enter the International Monetary Fund to achieve its first quarter goals, is opposed by the outflow of foreign currency for the purchase of energy.

The outflow of dollars for the energy category up 200% compared to a year ago and represents a quarter of the payment of total imports and a threat to the exchange balance in the coming months.

How will the Central Bank survive the winter in dollar terms? The question to an official had an obscure answer but explicit enough to translate it as much as possible tightening of the exchange rate is one sure increase in the interest rate which Guzmán continues to resist.

The decline in bond prices shows another deterioration of trust in public credit. A result that, for many, may go unnoticed, but which has a high cost for society as a whole. Faced with uncertainty, the risk hedging process begins to move.