Implements a savings option that solves the dilemma for investors in an uncertain scenario

Implements a savings option that solves the dilemma for investors in an uncertain scenario

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The month of July left a negative balance in the central bank’s foreign exchange buying and selling dynamics of USD 1,284 million, adding barely USD 2,000 million of net reserves, leaving little room for the monetary authority. action In August, strong sales in the first two weeks ($800 million) sowed the clouds. However, the story changed in the second half of the month, with taxes on energy purchases much lower than expected and apparently strong restrictions on imports. Thus, the central bank reduced the negative balance of the first two weeks to 520 million USD and managed to buy some time. The government will try to fight back by expanding the quantitative restrictions, and the possibility of differential exchange rates is being considered (currently only rumours).

Dual sovereign bonds are those that pay the best option for official exchange rate depreciation and the benchmark stabilization factor (inflation) plus an annual coupon of 2% (2.25% in the case of September). Then they explain the reason for the interest in these tools. It happens that in recent months they solve a very common dilemma of the market. A hedge against accelerating inflation? Or opt for dollar-linked instruments to hedge against a possible cautious jump in the official dollar? Faced with this unknown, double bond, in principle, the best of both worlds is saved in one investment. However, the market has priced in this alternative, extending the yield of these securities to both curves.

Treasuries raised $285.9 billion at the end of the month auction, comfortably exceeding the maturity amount of $91 billion. Thus, net funding for August was $250,000 million with a turnover ratio of 1.97. However, this result came at the cost of confirming the highest figures since the start of the Alberto Fernández administration. On the other hand, due to the risk of short-term debt rollover after swap removal, the local market retains its importance as the only true financing channel that will cover this year’s financial program. The August result is good, but it falls short of the level needed to cover fiscal needs for the year. The next tender will be held on Friday, the 16th of the month; On that date, the goal will be to refinance approximately $125,200 million in liabilities.

Sergio Massa’s arrival at the Ministry of Economy was full of expectations. Among them, the event brought peace to the foreign exchange sector. However, since that moment, which has already passed more than a month, the expectation of devaluation has not decreased. With the exception of the September contract, implied rates (TNA) in the Rofex from October this year to July 2023 have consistently remained above 100%. This reflects the future devaluation scenario in anticipation of the local market, which remains skeptical of the central bank’s concrete measures to strengthen international reserves. We have to wait for Minister Masa’s visit to the USA, which will take place in the next few days.

Jerome Powell’s words in Jackson Hole continue to resonate in the market. While the latest inflation data was encouraging, the official ruled out easing monetary policy. Thus, global markets are once again discounting the September rate hike by 75 basis points. A “soft landing” for the economy is still out of the question, and fears of a global recession are still on the scene. After Powell’s remarks, major indexes fell between 5% and 8% and global long rates are still rising. The developing world is suffering, with the BBG Emerging Markets Index down more than 0.60%. Thus, Argentina’s debt is at the mercy of international weaknesses.

Source: La Nacion