The Minister of Economy, Sergio Massa, will face his first test in the market this Tuesday, January 3, through a voluntary debt swap in pesos for decompress maturities of the first quarter of the year for an amount of $4.3 trillion.
In the market, they anticipate that the Ministry of Finance this year will carry out several debt conversion operations in view of the heavy load of maturities of 2023 that are around $12.4 trillion.
This is the third debt swap that is carried out under Massa’s management in the economic portfolio, the first took place on August 9, 2022, a few days after he took office, and the second took place on November 10.
Analysts explain that this exchange is also aimed at facilitating the Central Bank the roll over of the bonds it has been buying in recent weeks in a scenario where doubts continue about the debt in pesos, despite the fact that the government managed to close the 2022 financial program.
And it is that, by its organic charter, the monetary entity cannot participate in the Treasury tenders.
Due to the large holding of titles held by the BCRA and those held by other public bodies, in the market They estimate a floor percentage of adherence to the exchange of between 45% and 60%
In the swap, one of the baskets offers Dual bonds that adjust for inflation or the official exchange rate
Debt swap: what menu does it offer?
Economy offers a more diversified menu than in the two previous exchanges. But just like in both operations again appealed to offer investors Dual bonds, among the options.
The dual bond yields a yield adjusted for inflation or for changes in the official dollar, whichever is higher at the time of maturity.
and there is 8 eligible bonuses included in redemption: three Ledes with maturities on January 31, February 28, and March 31 (S31E3, S28F3 and S31M3), two Lecers that expire on January 20 and February 17 (X20E3 and X17F3), the Badlar Bond TB23, and two Boncers (TC23 and TX23).
Within this framework, the Treasury provides three different alternatives:
1.A basket made up of LEDs, and integrated 25% by one that expires in April of this year (S28A3), 35% with the one that expires in May (S31Y3), and 40% with a new one that expires in June 2023 (S30J3).
2. A basket made up of Dual Bonds: 35% with the one that expires in July 2023 (TDL23), another 35% with the one that expires in September of this year (TDS23) and another 30% with a DUAL that expires in February of 2024 (TDF24).
In the market they see that the exchange is so that the BCRA can roll up the debt bonds in pesos that it was buying
3. Economy added a third option this Monday to those two baskets that were in the original offer of this exchange that had been launched last Thursday. It incorporated a Lecer -the bill that adjusts for inflation- maturing in June (X1673) specifically eligible for the Lecer X20E3 and X17F3 (those that expire on January 20 and February 17, respectively).
Basket cutoff prices are defined at the auction and there is a cutoff price for each eligible title. The reception of offers will begin at 10:00 a.m. this Tuesday and end at 3:00 p.m. The liquidation of the awarded offers will take place on Friday, January 6.
Debt swap: the analysts’ view
Paul Repettohead of research at Aurum Valores, considered that “The baskets can be useful for some banks (the one in Duales), for public organizations the one in Ledes, but evidently they aroused little interest in the rest because they had to launch a new option that allows those who had adjustable by CER to continue maintaining that adjustment without having to accept longer instruments”
“Surely the Mutual Investment Funds dedicated to CER were not interested in the Duales offer. Economy had to appeal to this patch to improve adherence,” said an Aurum analysis.
In turn, in Facimex Values stated that “the exchange is in line with what we expected since debt maturities in pesos grew quite strongly from January and It is the only way to facilitate the roll over of the BCRA”.
In this sense, they stressed that “in the third review, the IMF published a graph with the maturity profile that suggests that 46% of the maturities of the first quarter of 2023 are in the hands of public entities.”
They estimate a floor adherence to the exchange of between 45 and 60% for participation of the BCRA and public entities
For his part, Fernando Baer, Quantum Finanzas economist, assessed that “only one quarter is kicked that expires in the first three months of 2023, or at most extends to the third quarter with the Duales offer, so concentration remains unchanged in 2023and it is not about going beyond 2024 because the demand is limited and because they do not want to validate higher rates”. And he opined that “with that vision, basket 1 looks interesting”.
of equal vision, Salvador Vitellia specialist in finance and agribusiness believes that the private sector “is going to spend more for the first basket that expires all this year, and before the elections, the market is demanding a lot of fixed rate.”
However, Tobias Pejkovichan economist at Facimex Valores, argued that “it is difficult to know which alternative will be more attractive since the allocation of the new instruments will be done by price indication and there will be an individual cut-off price for each of the eligible instruments; therefore, the exchange prizes with respect to the secondary market will be determined in the operation itself“.
Exchange: what accession floor do you estimate?
After the last Treasury debt tender, Economy was able to close the 2022 financial program with net financing of almost $700,000 million. However, only in January maturities already totaled 1.1 trillion.
In this frame, Pedro Siaba Serratea strategist at Portfolio Personal Inversiones (PPI) said that “the exchange will be very much aimed at cleaning up the holdings in the hands of the public sector” and specified that “according to our numbers, We estimate that 44.3% of the 8 eligible titles are in the hands of the public sector”.
“We believe that this will be the floor of acceptance of the operation, although we cannot rule out some private participation,” commented Siaba Serrate, who stressed that “the Treasury could take advantage of the demand for short-term fixed-rate bills (LEDEs) for adjustable bills (LECER) given the optimism about inflation for the next three months”.
In the last tender, Economy obtained net financing for almost $700,000 million
At the same time, I repeat estimated that “they would have guaranteed an exchange of at least 60% for the part held by public agencies and the BCRA, which adds up to $2.5 trillion”, but he judged that the relevant aspect of the operation will be to see “how much is exchanged above” that threshold.
In addition, Pejkovich He calculated that “between 45% and 50% of the maturities of the first are in the hands of public entities, therefore, I hope that the exchange will have a flat adherence around that figure” and agreed that “It will be relevant to analyze the participation of the private sector in the operation”.
In Delphos Investment they take for granted in the exchange “the participation of the Central Bank, official entities and public banks, which sets an acceptance floor of more than 50%”, while Viitelli foresees that “between 60 and 70% adhesion can be achieved with the help of public entities”.
For its part, the consultant eco go estimates that “public holding (of first quarter maturities) is 48.5%” so “despite the intervention of the BCRA in the last months that can be estimated at $600,000 millionprivate ownership continues to be high, and this means that a high participation for the Treasury cannot be guaranteed through the influence of the different offices of the public sector”.
challenging trail
Siaba Serrate considered that the exchange “even having an interesting adherence (15/20% above public ownership), we believe that it does not solve the weight problem”
The exchange is carried out in a scenario where the concern about the debt in pesos continues. In this regard, a report from GMA Capital He remarked that “the uncertainty about what may happen beyond the next term in terms of managing maturities in pesos makes it impossible for the Treasury to place titles outside of 2023”, and “this is reflected in the forward rates between 2023 and 2024 titles , which have exceeded 2 digits for more than 6 months”.
For the market, the exchange will not clear up doubts about the debt in pesos
“This invisible wall means that the only way to stretch maturities is by piling them up in 2023,” he emphasized.
The consultancy maintained that “it is true that approximately 60% of the securities maturing in 2023 are in the hands of public entities, a fact that with customized swaps could decompress the tension”, but “for the private sector, the concentration of maturities in the next year becomes a risk in itself”.
In eco go they also affirmed that, beyond this exchange, “what is clear is that the Treasury continues to face a wall in terms of issuance terms, so eIn the second and third quarters, you must find some economic or political mechanism that allows you to extend the deadlines“.
