The Minister of Economy, Sergio Massa, announced today the repurchase of public debt bonds for US$ 1,000 million, whose objective is to stop the pressure on the exchange market through the impact that the measure will have on stock prices.
The resources belong to the National Treasury and result from a forecast of savings for 2023, especially in the energy area due to increased tariffs, lower import prices, and better contract conditions.
“We saw a drop of a thousand points or a little more in Argentina’s Country Risk. That means a window of opportunity,” Massa said when presenting the operation.
The decision was first communicated and received a positive reaction from the market: at mid-round the bonds rose 6%, while the “Blue” fell to $375, the MEP fell to $341 and the Cash with Liquidation to $347.50 .
“We want to give clear signals and improve expectations,” they explained at the Palacio de Hacienda, where the focus was on a noticeable drop, especially in the MEP dollar, which will pull on the “parallel.”
After learning regarding the measure, market operators questioned that the announcement was made before the opening of the conference and prior to its completion because it represented a clear advantage for the holders of the bonds to be repurchased.
“We did it because it is a good market practice to announce an action of this type when the issuer does it,” they excused themselves in Economy.
In this first stage, the bonds to be recovered are those that mature in 2029 and 2030, issued in the 2020 restructuring. According to the current price, the application of US$ 1,000 would translate into a debt reduction for a nominal value of US$ $2,500.
The operation is executed by the Central Bank on behalf of the National Treasury (the owner of the funds) so it will not affect the balance of reserves.
“We focus on short bonds because it is where we believe the best opportunity is,” they emphasized at the Palacio de Hacienda.
When asked regarding possible criticisms regarding the use of this money when claimed for imports, the economic team affirmed that “it is a strategy in the management of liabilities with a broader vision that points to the long term. We want to show willingness that we are interested in returning to the market”.
first operation
According to the result of this first step, in Economy they do not rule out carrying out similar actions in the coming months.
In fact, Massa expects to advance in agreements of a similar profile with private banks.
“Some time ago we had different ‘repo’ offers but they did not convince us, now we hope to sit down once more and close in better conditions”, explained from the economic team.
Basically a “repo” is the offer of a private holder to the issuer (in this case the Argentine State) of a debt security at a certain price.
Regarding a supposed approval by the IMF, in Economy they affirmed that “it is not necessary because it is absolutely outside the current agreement”, they added in the Palace of Finance.
As a complementary measure, the Central Bank raised the rate for the repo operation by 200 basis points. The passive repos rate at 1 business day term is 72% while for active operations at 1 business day term it is 97%.
With this decision, the monetary authority also sought to prop up the decline in stock prices.
Despite the fact that the official strategy is focused on the bonds that mature in 2029 and 2030, the Resolution that enables the operation and was published today in the Official Gazette defines a total of 11 eligible bonds.
The chosen bonds are global in dollars with maturities in 2029, 2030, 2035, 2041 and 2046. The bonds of the Argentine Republic in dollars and under Argentine law with maturities in 2029, 2030, 2035, 2038 and 2041 were also registered.
