2023-11-22 16:47:00
In his first journalistic statements following the runoff, the president-elect Javier Milei gave signs of what may happen with the fixed deadlines following his assumption, by ruling out the possibility of implementing a “Bonex Plan” to solve the Leliq problem.
The “disarmament” of the Leliq is one of the issues to be resolved by the next government to carry out a stabilization plan and reduction of inflation, market specialists agree.
What are Leliq?
The Leliq are Letters from the Central Bank of the Argentine Republic (BCRA) which can only be acquired by financial entities. As a counterpart to the minimum rate established for fixed terms, the BCRA pays commercial banks an interest rate on reserve requirements (portion of their deposits that commercial banks cannot lend).
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The BCRA changes pesos to commercial banks in exchange for a return and banks pay their customers a similar interest rate on their fixed deposit.
According to Guido Zackfrom Fundar, the objective of the Leliq is that the surplus pesos do not end up in the foreign exchange market, putting pressure on the exchange rate and increasing inflation.
On the other hand, “one of the problems that Leliq generates on the economy is all this concern regarding a liability that grows every month at a rate of 11% per month”, commented economist Ramiro Tosi.
“This means that every month the Central Bank have to issue $2 billion to pay the interest on these remunerated liabilities“Tosi added. Currently, Leliq’s stock exceeds $13 billion and the risk of the BCRA’s inability to pay that debt generates an economic risk.
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In his first statements as president-elect, Javier Milei announced that “We are going to dismantle the Leliq via a market solution, without violating rights.” In this way, it ruled out the implementation of a fixed-term deposit exchange known as the Bonex Plan.
What was the Bonex Plan
In 1989, shortly following taking office, Carlos Menem’s government faced a large number of maturities of fixed terms in pesos, which were estimated at 3,000 million dollars.
With the “Bonex Plan”, The holders of the fixed terms had their fixed-term deposits changed for Bonex 89, bonds with a 10-year term.
What interest rates are the fixed terms paying?
In October, The Central Bank established that fixed terms of up to 30 million of pesos made by human beings, have a floor annual nominal rate (TNA) of 133% for 30-day deposits.
This represents a monthly return of 11.08% and 253% annual effective (TEA), in the event that the capital and interest obtained are reinvested every 30 days every month.
With this rate, the effective monthly yield on 30-day peso deposits becomes 11.08%.
Fixed deadlines and the first signs of Javier Milei
According to Andrés Reschinianalyst at F2 Soluciones Financieras, following a fall in October, the fixed-term deposits in current values were recoveringalthough slowly and lowering the deposits in sight.
Regarding the first signs of the president-elect, Reschini said that “There are not many details regarding how monetary issues will be paid, But Javier Milei in his first speech as president-elect spoke out in favor of compliance with commitments and private property.”
“He also spoke of solve the problems of the Central Bank and not eliminate it so it is likely that this will not inject nervousness,” added the analyst.
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For its part, Salvador Vitelli, an analyst at Romano Group, commented to PERFIL that Salvador Vitelli, an analyst at Romano Group, “what Milei says regarding the upcoming monetary and exchange rate policy is going to be forceful. Yesterday he did not refer to dollarization, so “In interest rates we will see what can happen with the peso market.”
Vitelli added that “in a scenario of elimination of the domestic currency, I do not see that the interest rate is a variable that we are going to look at. This is due to the fall in demand for money There may be a fairly significant jump in the exchange rate, “That is not necessarily compensated with a higher interest rate, because what we want is to eliminate the currency and not generate attractions for it.”
Renewal of fixed terms
Regarding the attitude of savers regarding fixed terms, Reschini commented that “perhaps the market remains more cautious regarding placements in the term while awaiting further definitions, but it does not seem that for now there will be a panic flight from the peso.”
Regarding the attitude of savers, Vitelli warns that “deposits are going to fall in real terms, by the latent project of dollarization, although it is not confirmed. “I am cautious regarding what happens with that, because dollarization can make these deposits fall sharply due to the destruction of the domestic currency.”
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