He Minister of Economy, Sergio Massa, managed to break the wall of maturities of the debt in pesos that had generated tensions in the financial market before the fears of a reprofiling for the end of the renovations as the primary elections approached. The negotiations with the banks had the approval of the International Monetary Fund (IMF), although its main point of discussion was the political agreement within the ruling coalition and the leap from the uncertainties that were generated by the renewal of power in the Casa Rosada.
There were two central debates at the discussion table: the liquidity that banks can access before a risk of reprofiling of the bonds in pesos; and the political gesture that the head of the Palacio de Hacienda needed to have to sustain his economic plan until the end of the mandate of Alberto Fernandez. In fact, the real impact of the agreement with private banks will have a minor impact on the total maturities.
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The tower of July was left standingwhere the weight of the public sector is almost total, which will allow the economic team to make use of ingenuity to achieve the renewal of maturities and get rid of short-term problems. Financial entities have in their possession 20% of the maturities that are in private handsand they operate from March until next June, but their political impact on the mood of the market was much greater, according to what they pointed out to PROFILE City analysts.
Political risk, the key
“We are not going to ignore that there is a risk associated with politics. The banks protect themselves from financial needs or from some unhappy announcement in the event that there is a new management. He is a ghost that has the market. The risk and the rates are high”, admitted official sources, following the meeting that the authorities had with the representatives of the banks that operate in the country.
The agreement of the Board of Directors of the Central Bank is still missing to define the operation of the PUT (a future sale option) that will have banks to guard once morest a lack of liquidity, before a possible decision of a reprofiling of maturities. That was the condition that the bankers put when signing: having access to the pesos to redefine their strategy. For example, jump from bonds to leliqs, if they consider that there is a high fear of lack of funds to liquidate or distrust of investors to renew.
As indicated by the BCRA, article 18 of the organic charter of the entity says that it may “buy and sell at market prices, in spot and term operations, public securities, currencies and other financial assets for purposes of monetary, exchange rate regulation , financial and credit”. In short, that point authorizes the operation since “the put is a financial asset”clarified sources close to the president Miguel Pesce. In this way, the Central cleared up technical doubts regarding its application.
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“The time to execute it will have a limit of less than 15 days”, detailed the official sources, who also clarified that the operation “does not protect a price, because it is at the market value of the previous day.” “In no way does it have an emission and inflationary risk. If the banks go crazy, they are going to take it out and they are going to leliq”, assured members of the economic team, who participated in the design of the new strategy.
The new instrument basket
The call for reconversion of the bonds maturing in March, April, May and June for a basket of new instruments was announced late Monday by the Ministry of Economy. It will take place next Thursday and 7.5 billion pesos will be at stake, according to unofficial calculations. The walls with the private sector are concentrated in that period of time.
Two baskets of instruments will be offered at 30% of the New CER Bond, maturing in April 2024; 40% New CER Bond, maturing in October 2024; and a 30% New CER Bond, maturing in February 2025. In addition, a 30% Dual Bond, maturing in February 2024 (reopening); 40% New CER Bond, maturing in October 2024; and 30% of the New CER Bond, maturing in February 2025.
“The objective of this conversion operation, unlike the previous ones, is to extend the short maturity profile to the mid/long end of the curvereducing uncertainty and market volatility and improving the conditions of predictability of Treasury financing,” said a press release from the Ministry of Economy.
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A destabilization plan?
In the Palacio de Hacienda they believe that the Public denunciations made by Together for Change sought to fuel the financial fire that was approaching with the maturities of debt in pesos. “It is striking that they have come out with a statement before the details are known. No one can think of paying the debt in cash. I didn’t know if the statement was true or false,” said an official close to Massa ironically.
In the market, sources that participate in the operations, were satisfied with the new maturity curve. “We will see what percentage enters the basket of new instruments that they launched, but That the maturities for 2024 and 2025 can be passed is very good news”, assured the president of Alyc Patentes y Valores, Santiago Lopez Alfaro. However, consulted by this means, the former Minister of Economy and main reference of the JxC economic team, Hernán Lacunza, maintained that the new cadre “worsens” the situation that the next government will inherit.
From the environment of the Minister of Economy they clarified that “the IMF’s considerations on the ordering of the debt are conceptual”, but they admitted that in Washington they were aware of the new government strategy to stretch maturities. With that OK of the staff of the Fund, at the Palacio de Hacienda gave political signs of alignment with the financial decision. Definitely, the banks needed to see signs of management command and a guarantee to exit on timeif the winds of change forced a change of direction.
am / ds
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