Market: an incipient buying current of Argentine debt from riskier investors could be generated, according to a consultancy
06/20/2022 – 12:14 p.m.
A report the Quantum Consultingof economist Daniel Marxpointed out that “given the important difference between the quotes of the debt in dollars and pesosin the medium term the debt in dollars has a higher potential value recovery if a consistent, sustainable and credible economic program can be implemented”.
This situation could generate an incipient current buyer of Argentine debt from investors more risky.
According to the consultant, there could be a “debt management” of the next government in December 2023, which includes CER and Dollar Linked bonds, and another in June 2024, in the case of foreign currency paper.
For the papers in pesos, can extend the life of bonds for three years, but with new coupons, that start to yield 3% per year for the debt adjusted for inflation and 4% for the one linked to the dollar.
An incipient flow of purchases of Argentine debt from riskier investors could be generated.
In the case of bonds in Dollars “Debt management is done in June 2024 with an extension for 5 years in the average life” in which “there is no change in coupons or removal of capital.”
Likewise, Quantum indicates that “the differences between the evolution of the official exchange rate in dollars and pesos and the ilocal inflation and that of the United States they combine so that the bilateral real exchange rate appreciates 6% in 2022 and 16% in 2023″.
“In 2024, the delay prior to the end of the year is corrected with a depreciation real slightly higher than 20%. While in 2022 and 2023 the evolution of the real exchange rate has a negative impact on the gap, it is gradually reduced in 2024, reaching levels of 40% in the second half of that year,” the report states.
The price of debt in dollars is low and the markets begin to see potential returns
Thus, the consultant considers that “these movements imply that between June 2023 and the same month of 2024 the official exchange rate depreciates 16% in real terms and the free exchange rate appreciates 23% also in real terms.” The report includes “rates discount for CER debt is 6%, Dollar Linked 8% and bonds in dollars 12%”.
“Following the aforementioned assumptions and parameters, we obtain that, in the aforementioned scenario, the dollar debt would register capital gains of between 180% (GD29) and 105% (GD41), much higher than those of the debt adjustable by CER (earnings of the order of 30-50%)”, they indicate.
“This is mainly due to the current very low relative parity of the dollar debt (average 27%) compared to that of the debt in ARS (average 80-90%),” concludes the consultant’s report.