The Minister of Economy Sergio Massa will go through the last Treasury debt tender of this month this Wednesday, April 26, in which it will seek to harvest funds for cover maturities for $965,000 million.
For analysts, it will be a challenging test due to the magnitude of the maturity, which is the highest measured in constant terms since May 2022, and due to the context of exchange tension in which the blue dollar hit a new record on Tuesday.
In this climate, the Analysts envision that the Treasury will have to validate a new rate hike in this tender to try to attract net financing that it so badly needs to finance the fiscal deficit that was very large in March, for which reason the goal set for the first quarter with the IMF was also not met.
Debt in pesos: what is the menu of the tender?
In Facimex Values calculated that “after the debt swap in pesos in March, the 95% of maturities are held by the private sector (one third in the hands of the Mutual Investment Funds and banks).
For this tender, the Finance Secretariat prepared a wide and varied menu of 8 instruments of debt, which is concentrated in short-term securities and offers alternatives to hedge against accelerating inflation and the devaluation of the official exchange rate. And, once again, it will try to extend the placement deadlines beyond the electoral process, by offering a title that expires in 2024.
On the menu, there is a Discount Treasury Liquidity Bill (LELITE) which expires on may 19 of this year, which can be subscribed only by Common Investment Funds (FCI).
Economy must raise funds to cover maturities for almost $1 trillion
There is also a Fixed Rate Discount Treasury Bill (LED’s) which expires on July 31 (S31L3).
In addition, they offer two Treasury Bill adjusted by CER (that is, it indexes for inflation) with maturities on July 18 (X18L3) and September 18 of this year (X18S3), and a CER-adjusted bond (Boncer) that expires on August 13, 2023 (T2X3).
Provides a dollar linked treasury bondthat is, it is adjusted by the official exchange rate, one that expires on July 31, 2023 (T2V3D), and one dollar linked treasury bill which expires on October 31 of this year (D31O3).
On this occasion, it also offers a Bono Dual which expires on April 30, 2024, and adjusts for inflation or the exchange rate, the option that gives the highest yield to maturity.
With this menu, Economy initially seeks to reap $310,000 million in local currency instruments and the equivalent of $1,000 million through exchange rate-adjusted securities. The reception of offers will begin at 10:00 a.m. this Wednesday and end at 3:00 p.m.
Debt in pesos: what does the market think of the menu?
Pedro Siaba SerratePPI strategist, highlighted thate “six of the eight alternatives offered by the Treasury are adjusted for inflation, for the exchange rate or for the maximum of both variables” and maintained that “it is no surprise that the Finance team seeks unregulated private sector demand through this type of short-term instruments.”
The tender will take place in a climate of greater exchange tension where the blue dollar closed on Tuesday at a record of $495
The specialist emphasized that “the biggest challenge this week lies in the magnitude of the maturities in a context of growing exchange rate tension”, and opined that the LECER “shorter should generate attractiveness again” before the data that show acceleration of the inflation.
Tobias PejkovinchFacimex Valores economist also evaluated that “it will be a key test, as the economic team will face the most challenging maturity since May 2022 (measuring maturities at constant prices)”
“In terms of strategy, we see attractiveness in positioning in Lecer July (X18L3) given high-frequency data that shows high inflation and inflation break-evens for LEDs that do not provide a sufficient cushion with respect to our baseline scenario,” Indian.
In turn, the expert commented that “we still do not see attractiveness in dollar-linked instruments maturing in 2023.”
For their part, analysts Delphi Investment they stressed that “we discount that demand will be concentrated in instruments that provide inflation and exchange rate coverage“. And they added that “it will be interesting to see how attractive the new DUAL title is by April 2024, which is two months longer than the term of the currently longest-term DUAL title (TDF24).”
Debt in pesos: what expectations do analysts have?
The bidding will take place after a new jump of the blue dollar that this Tuesday was on the verge of $500. So, Lucio Garay MendezEco Go economist, warned that “it is a very complicated bidding; Finance has to refinance almost $1 trillion, and although there is dialogue with the banks, and that should ensure a high level of refinancing, the context does not help.”
Analysts predict that the Treasury will have to validate a rate hike in the tender
“The rise in the dollar leaves Treasury instruments in the background. All in all, the menu is a bit stage-proof. The government securities offered are mostly indexed and short-term, so there is a demand there”, he claimed. In that framework, he believes that “the Treasury is likely to raise the rate again.”
The financial analyst Christian Butler He considered that “in an economy with 7-8% monthly inflation, companies need to have money constantly invested, they cannot afford to leave the money in the savings account just in case.”
“From that point of view, the Treasury should get the necessary roll. Obviously, exchange rate instability harms when placing debt. And given the inflationary acceleration that the market is anticipating, the Treasury will probably have to pay a higher rate“, he raised.
For his part, Siaba Serrate He stressed that “given the nominality, it is the largest amount to face in a tender, at a complex moment for the local market and where investors are not very open to extending the duration beyond the primary elections.”
“In this way, noo We rule out that the Treasury should be generous with the rates offered to capture the attention of the private sector“, he asserted. The expert said that the focus will once again be “on the fixed-rate instruments offered since they can give signals about the next steps of the BCRA.”
“It is interesting that LELITE is reopened at a TEA of 108.4% (+110 basis points compared to last week’s tender). What does this suggest to us? We do not rule out a new adjustment of the rate by the BCRA this Thursday, given that the market knew little about the interest rate movement the previous week. One hypothesis that we handle is that the BCRA perhaps did not raise the rate to the magnitude that it would have wanted to avoid cannibalizing the Treasury in this very complicated tender, “he argued.
