2023-10-07 03:01:00
Exchange volatility continues to increase concern in the local market. The illegal dollar ended the week at 880 pesos, increasing 37 pesos during the day and 80 pesos during the week. Uncertainty increased sharply a few weeks before the elections and impacted the prices of sovereign bonds in dollars, which this month accumulated losses of up to 16 percent, and this Friday they lost up to almost 7 percent. The Central Bank sold foreign currency in the exchange market, while the CNV launched new controls to buy dollars through bonds.
The consulting firm 1816 released a report to its clients titled “crisis in all markets.” The document mentions that there are at least four elements that generated a whirlwind on the prices of the financial dollar and triggered the exchange gap to levels close to 150 percent.
“The multiple sources of peso issuance (fiscal stimulus, Leliq, Central purchases of bonds in local currency), the negative stock of net reserves, electoral uncertainty and the strength of the dollar at a global level put together a perfect combo to boost cash. with liquidation”, it is mentioned.
To these points we can add that the statements of the opposition candidates and economists do not help to calm the waters. While Carlos Melconian suggests that the blue dollar is cheap at these prices, Javier Milei insists that dollarizing is becoming increasingly simpler as financial exchange rate prices rise.
Until the first round there are eight working wheels, and the interventions with bonds to contain the MEP would have accelerated to 100 million per day. For this reason, the economic team regulated new measures to contain the pressures with financial dollars, increasing controls to access the currency through the purchase and sale of securities in the stock market. Although the cash with settlement fell 0.2 percent, to 891.92 pesos, the MEP dollar rose once more 3.6 percent, to 812 pesos per unit.
In the document from the consulting firm 1816, it is mentioned that the liquidations of the agricultural complex were one of the factors that until a few days ago generated a certain moderation on financial dollars, since the export incentive program allows part of the soybean sales to be liquidated in cash. with liquidation. “But the truth is that sales by grain producers this week fell to just 75 thousand tons per day, levels similar to those in August, when the incentive program had not been launched,” states the consulting firm’s report.
Sovereign bonds are one of the stock market assets hardest hit by the climate of speculation and uncertainty. Yesterday, some securities in foreign currency recorded losses of almost 7 percent. The prices of these bonds returned to operating around 25 percent parity, when until the end of August they were closer to 30 or 35 percent. Part of the wave of sales of public securities is explained by the declarations of dollarization by the Libertad Avanza candidate. One of investors’ main fears is that Milei will actually try to carry out her dollarization program, in case she wins the elections.
In that scenario, Emilio Ocampo would occupy the position of president of the Central Bank, and this economist’s proposal sets off all the alerts. His proposal is that he would de jure exchange all the debt in pesos for dollars, which would strongly increase the stock of liabilities in foreign currency. In that case, Argentina would occupy the list of the country with the most dollar-denominated debt in the world, with the exception of the United States. It is a point that triggers uncertainty regarding the country’s repayment capacity.
Added to the fall in debt prices in foreign currency is the volatility of securities in local currency indexed by different mechanisms such as inflation and those that follow the wholesale exchange rate.
The bonds that adjust by CER are some of those that have had the greatest price variation since the elections. In some cases, such as TX24, they went from having negative rates of return in August (that is, they were trading above parity) to having rates of return close to almost 20 percent. This shows that there has been a wave of selling in these assets over the past few weeks.
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