This Wednesday, March 22, the sovereign debt Argentina collapses after the Government affirmed that it will seek to withdraw from public organizations its dollar bond holdings to reduce the exchange volatility.
In principle, the analysts consulted by PERFIL maintained that the measure would comply with that goal to put a brake on exchange rate volatility, but “at what cost?”
The qualifying adjectives they chose the specialists Consulted by this means were: “weird, appalling, poorly executed and ticking time bomb”, and exposed a communication problem on the part of the Government, since “the market does not understand the measure”which would explain the price of sovereign bonds this Wednesday.
a time bomb
“An atrocious measure that leaves a time bomb to the next administration. They are taking out the titles in Dollars in public entities such as the Social Security System (FGS) in exchange for bonds priceless public, which will require restructuring. with those dollars financial dollar markets will intervene”, pointed out the economist Natalia Butterfly to PROFILE.
Bankers with Sergio Massa: the meeting was “very good” but sovereign bonds fell
“They take the most vulnerable to give them to a few hands. The problem is not the support of the peso, but the demand for the peso that falls due to the worsening crisis of confidence. And that has its roots in the last broadcastwhich has an impact of up to 24 months. Today silver is issued to pay debt interest present and future with an increase in remunerated debt”, warned the economist.
When asked about the effectiveness of the measure, she commented: “The demand for dollars will continue to grow, as long as the demand for pesos continues to fall. Likewise, the rise in sovereign debt only makes it more difficult for roll over in the coming months, since since it is unpayable, it pushes towards higher interest rates, which affects local activity, and later, about the exchange market”.
An act of desperation on the part of Massa
“It is a poorly executed measure. Seems like an act of desperation depending on the market situation and a sign that as Minister of Economy cannot be given: despair,” he assured PERFIL Alejandro Bianchi, CEO of Advisor Inversiones.com.ar.
“On the other hand, you have to have very well planned how you are going to act, what you are going to do. Right now, there is a lot of uncertainty regarding the measures and what they will entail because they are talking about a delisting of global bonds, when in reality the argentine government does not have all the global bonds in circulation; but if there is many individuals who have global bonds. So if the global bonds are not fully in your possession, how are you going to unlist them”, warned the analyst.
The Government forces state agencies to sell their bonds in dollars and convert them to pesos
“The one who has global bonds today, right now he is immersed in uncertainty not knowing if he will be able to sell it. That is why the market reactionin my opinion, is that the Government it is not clear what are they going to do”, Bianchi specified.
Is the operation poorly explained?
“It seems that it is poorly explained that they are going to delist and that in reality it is an intra-public sector sale operation that would not go through the market and that they are going to withdraw only those bonds from trading. What is very different from delisting an asset”, he justified.
What Bianchi refers to is that to delist an asset is to take it off the market and that it cannot operate anymore. For this reason, the desperation of those who today have global bonds and suddenly they are told that they will not be able to trade this bond anymore. “You have to go out and sell”, he assured.
“Perhaps the underlying idea and what is pursued is to concentrate all holdings of government bondsin local law bonds, to give it greater liquidity and remove that liquidity from local bonds so that the local law is the reference and thus be able to control them a little more. It seems to me that this is the intention,” Bianchi said.
Will it succeed in putting a damper on exchange rate volatility?
“In my opinion, it creates more uncertainty. It will very likely put more pressure on financial dollars in the coming weeks,” Motyl said.
For his part, Bianchi replied: “At first look for that. Really I don’t know if it will be successful in stopping the evolution of parallel dollars, because in the background there is a broken central bankwhich has negative reserves and which generally receives a flow of dollars at this time of the year product of the harvest that allows it to weather these strong purchases that our market has”.
100% floor for inflation and $400 for the dollar
What the analyst is referring to is that in an election year there is a lot of volatilityin a context in which the banking crisis in the United States, the continuous rises in interest rates, triggers the risk. In this context, the investor seeks to become dollarized by fleeing from the pesos. “There will be no dollars to satisfy this demand, since the BCRA will receive $20 billion less this year because of the drought,” warned Bianchi.
How are they plugging the hole in the BCRA?
“Con swaps, with greater indebtedness with international organizations and with measures such as the one executed today by the Ministry of Economy to try control the capital market. They are all palliative, in the background, the reality is very different due to internal factors and in the midst of a context in which there is a very strong demand due to market conditions in general”, he asserted.
“The logical thing is that the exchange rate will initially seek the area of 450 pesos per dollar and only then can it stabilize at least until the elections, more or less”, concluded Bianchi.
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