Guzmán receives the banks and shows them his plan to stabilize the dollar and bonds

The Ministry of Economy has long since adopted a routine: calling the banks one by one to offer them bonds before the pesos debt auctions. The person in charge of answering the phone is the Undersecretary for Finance, led by Ramiro Tosi. But for 10 days, the outbreak of tensions in the financial markets accelerated contacts and led to a key meeting with bankerswhich will take place this week.

Martino Guzmán will receive representatives from the Association of Argentine Banks (ADEBA) on Wednesday and the following day will be the turn of the Association of Foreign Banks (ABA). The talks were scheduled last week with the aim of reassuring the markets, following the collapse of pesos bonds, the rise in Country Risk to 2,125 basis points and the rise of the dollar by more than 10% in 10 days.

“The meeting with the banks is a usual thing, the dialogue is permanent “, pointed out sources of Economics. The idea is to listen to executives and finish defining the next tools to resolve the turmoil unleashed on June 8, when CER bonds fell 12%. The official reading is that there has been a “disassociated” behavior of asset prices in pesos, which required a series of “stabilization” measures.

The combo in question involved the purchase of Treasury bills, the hike in rates and the acceleration of the dollar by the Central Bank, along with signals from the Minister of Economy such as the formalization of the removal of energy subsidies and a budget with spending growth of 51% below the expected level of inflation, up to 62%. A reaction that was requested by the IMF, but which was seen as belated on the market.

Against this backdrop, one of the challenges will be regaining confidence in Treasury debt instruments. According to Equilibra, out of a total of 11.2 trillion pesos debt (14.5% of GDP), the private sector led by banks, insurance companies and investment funds accounts for almost half of the equities, most of the bonds adjusted by the inflation (CER). The question is whether they will continue to renew their appetite after the departure of $ 240,000 million.

All eyes are on the litmus test of June 28, when the economy will have to roll over a $ 522 trillion deadline after hedging one of $ 11 trillion last week by raising rates. “We are in a stock regime, there are not many options, where will we go, the Central Bank intervened well, but coordination with Banco Nación was lacking“acknowledged a private sector banker.

In the banks they believe that the race triggered by the Pellegrini Fund, of the Nation, was a “technical error”, but that, although there are still tensions, the market “is calming down”. The cost was not free: from “black” Wednesday, the BCRA had to issue nearly $ 400,000 million in purchases of CERs and Treasury bills (Letes) to support its value, a decreasing operation that will be repeated on Tuesday and Wednesday.

That issue equates to more than half of the assistance to the Treasury through temporary advances foreseen in the program with the IMF for the whole of 2022. The Central, moreover, has had to authorize the largest rate hike to date. The 28-day Leliq went from 49 to 52% and the fixed maturities from 48% to 53% nominal per year. Although they are still lagging behind the inflation expected from the private sector, aims to capture the pesos it should have placed on the market and disable dollarization.

The other front Guzmán is following closely is the dollar. In the single foreign exchange market, the BCRA lost $ 400 million in June. The shock on the pesos debt pushed prices up to parallel levels of $ 233 (MEP) and $ 242 (CCL). It remains to be seen whether this week’s changes will be defined in the financial and foreign exchange framework. On the market, they do not rule out new regulations for banks, a greater monetary issue or tightening of inventories.