Leandro Ziccarelli, CEPA economist.

Leandro Ziccarelli, economist at the Center for Argentine Political Economy (CEPA)

The CEPA economist, Leandro Ziccarelli, It coincides that this panorama was conceived a long time ago. “What we saw at the end of last week, with the dollars running and the Central Bank having to intervene in the debt market in pesos, is a corollary of something that has been going on for some time. Since mid-April, the market can already see less appetite for assets in pesos, including CERs, tied to official inflation, which can be said to be due to the short legs of the financial program that Guzmán closed with the IMF. That created a bit of uncertainty.”

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Leandro Ziccarelli, CEPA economist.

But the specialist also attributes to other factors. “The trigger was the statements of those who may be the next Economy Ministers of an opposition administration, such as (Hernan) lacunza or (Luciano) Laspina, who openly said that they would not face the debt and would evaluate a path like the one they took in 2019, reshaping, and that generated a panic in the market.

However, Ziccarelli remarked that this panic generated problems for the placement of the Government’s debt after the elections and this was accentuated, and he could no longer place in the transition. “Last week the 4-month Lecers fell sharply, beyond the Lacunza effect. But that already had to do with something else, with the financial program. The market players do not fully understand how Guzmán is going to comply with the agreement with the IMF, that is the main risk”.

Ziccarelli warned that in the first semester the Central Bank of 2022 could not accumulate reserves and that at the beginning of the second, neither. “The first is always the best, now the second has started, which is always the worst, and we are without the possibility of having accumulated and an agreement with the IMF without the possibility of changing the goals, and that it is difficult to meet, and with expenses in sky-high subsidies. There is a combustion of things, which make noise, and the financial situation of the Government is complicated. But clearly the trigger was the panic that eventually a management after 2023 defaulted the debt in pesos as it was done in 2019 “, concluded.

Gustavo Ber, Economist at the Ver Study

According to Gustavo Ber, this Monday the risk-off climate deepens on Wall Street, given the escalation in rates and waiting for the Fed’s reaction after the latest inflation data, before which domestic assets accompany the external weakness, to which are added local political and economic tensions.

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“So the S&P Merval has lost 2% so far, due to the weakness exhibited by the main ADRs, which are dragged down by the climate of global risk aversion and so premature bets on the “ electoral trade” are already evaporated”he claimed.

But in addition, he assured that he also The sharp declines among bonds spread, this time with average declines of 2% in their prices in dollars among the main references, with a country risk already close to 2,100 bp., given that caution grows due to external and internal noise, and the penalized parities and the “step up” in the coupons no longer cushion the unfavorable technical position.

Ber said that “the recent tensions on the CER titles do not contribute either, with disarming of positions and jumps in yields, which could anticipate difficulties in the next auctions, where challenging levels of “roll-over” will have to be managed – given a profile of concentrates short-term maturities – in order to avoid incurring in greater monetary financing”.

For the expert, with numerous economic challenges ahead to be managed, and an unconstructive political climate in the background, the risks are growing that the imbalances will worsen beyond the goals committed to with the IMF. “Faced with a pace of purchases that has not managed to rise, not only is discounting that it would not be possible to meet the goal of accumulation of reserves, but also growing difficulties in the exchange balance as of the second semester.”

Faced with these concerns, added to the noise about the CER titles, the financial dollars have woken up and so they rehearse a rapid upward rearrangement in the last wheels, since they could not continue to be “pressed” over time under a scenario of high inflation, given that, like the wholesaler, they are incubating growing relative backwardness.

Pablo Besmedrisnik, director of Invenómica

For the economist Pablo Besmedrisnik, the medium-term macro inconsistencies are hitting the short-term decisions of bondholders. “The heavy burden of maturities in pesos, in a context of fiscal weakness and high inflationary pressure, creates the space to guess changes in the terms of the bonds, call it a re-profiling or restructuring”commented.

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Pablo Besmedrinik

At the same, Besmedrisnik stressed that the risk of occurrence of this anticipates decisions of market players. “Thus, what can happen in the future, due to the effect of expectations, ends up happening before. To avoid more traumatic outcomes, the State operates, and the market eludes”, He stated to this medium.

“The maturities of bonds in pesos expose the authority to a permanent state of examination by the market. Not only decisions of the current economic team are contemplated, but also possible policies that may arise in a transition period and those generated by a possible future political project, ”he indicated.

Camilo Tiscornia, from C&T Economic Advisors

“We are seeing a combination of uncertainties. External issues, which are complicated, are combined with local issues. We are ready for the Fed to raise rates in the United States again and there is a lot of trouble abroad, which plays against us , and Bitcoin, the cryptocurrencies, fell a lot. We come from several very complicated weeks in the international financial part, and that can affect country risk and actions outside of Argentina“, evaluated Tiscornia in dialogue with Ambit.

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However, the analyst assured that the most complicated scenario these days is the local one. “Right now the most relevant thing is the local, what happened last week with the CER Bonds, where several things were combined. There were public bodies that had to go out and sell those bonds, and their price dropped a lot. That was in a context of fear, of what could happen. Those bonds with CER accumulate a lot, and there may be fear of a re-profiling in the next government. They are rumors that you never know how true they are, but they generate concern “held.

For Tiscornia, the rumors were combined with a sale of public bodies, prices fell and rates rose. “We are in moments of uncertainty. It is government debt, which comes from the fiscal deficit. The question is always: If you go out and issue like crazy, how are you going to pay that debt? Are you going to have the resources to repay those bonds or are you going to have to resort to the monetary issue, and then the dollar is going to jump at that moment? This speculation that exists, before some moments, is triggered and corrections are advanced “complete.

Likewise, he said that simultaneously with the fall of the bonds, a part of the investors will buy dollars. “That is why the Cash with Liquidation rises, which is an exchange rate to get money out of the country that can be operated with some freedom. And we also see the blue dollar rising. It is a typical situation of fear and uncertainty. The bottom line is the doubts regarding the fiscal deficit, that the government does not do much to placate them”.

Tiscornia recalled that “in the agreement with the IMF they undertook to lower them and we see that they are not doing so. The results of public accounts in recent months are very bad, and we are entering a winter that is worse, because we need to import gas, and rates are not adjusted as much. There are many doubts about what will happen to the fiscal deficit, and the market wonders: how are they going to pay for the bonds? Are they going to issue more money to pay for that? It is speculation, because in the short term pays them normally”.

Javier Timerman, Adcap Financial Group

“It is impossible for a single factor to explain the rise in country risk and the collapse of bonds, there are several. Argentina, after the restructuring of its debt, lost the ability to finance itself in dollars in the foreign market and the only source of genuine financing was left to borrow in pesos in the local market”, Javier Timerman said.

“As there are expectations of inflation and devaluation, the market began to buy debt and finance the government in bonds that are tied mainly to inflation and, to a lesser extent, in bonds tied to the dollar.”he added to Radio Metro.



In this line, he commented that, as the demand for inflation-linked bonds “grew a lot, because it was the safest in terms of investment, the market bought a lot of CER debt and the Government began to borrow practically only in this type of bonds “, while adding: “That’s where the market’s questions about a possible devaluation or reprofiling appeared.”

He also pointed out that in Argentina, inflation-linked bonds “were trading at inflation+20% on Thursday. So, what there is in the country is a crisis of confidence about what can happen with these bonds.” “In short, the catalysts for all this were doubts, uncertainties. And the market then began to undo those positions,” he concluded.

Martin Guzman, Minister of Economy

Last week Martín Guzmán criticized the “great irresponsibility” opposition sectors to circulate versions of a possible default, while ratifying the Government’s decision to “strengthen the public debt market in pesos”. And this Monday the Minister of Economy assured that the Government of Alberto Fernández “Never” would default the debt in pesos, given rumors of a potential reshaping of inflation-indexed bond maturities.

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“And as for the barbarity of defaulting debt in pesos: our government would never do that. Credit in its own currency is a pillar of every sovereign state,” said the head of the Palacio de Hacienda on the social network Twitter.

Guzmán expressed these concepts 24 hours before an auction of inflation-adjusted bonds, for $14,000 million nominalin what will be a test on the state of mind of investors with the Government.

This Tuesday the Ministry of Economy will put out to tender five debt securities in pesos, one of them exclusive for the Common Investment Funds, in an offer that includes fixed-rate bonds, with others adjusted for price variations. The reception of offers will begin at 10 on Tuesday and will last until 3 p.m.

The title that can be subscribed only by Common Investment Funds is a Discounted Liquidity Bill maturing on July 15. Then four bills that make up the Market Makers Program will be tendered, two of them at a discount, one due on August 31, and another on November 30.

Two more will be added to these offers, adjusted by CER (inflation) also at a discount, one payable on October 21, and the other on December 16, all within this year.

Last week, the main financial instruments that the Argentine State has fell by up to 10% of their value, wrapped in versions that would indicate that, in the face of a change in the political sign of the Government, there could be a postponement of payments. The Casa Rosada emphatically denied it.

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