After the BCRA cut rates, the economy was unable to meet the peso debt tender’s maturities.

The Ministry of Economy wanted to ensure the success of the tender for treasury bonds and bills. Before the close of the event, the monetary policy rate was cut by 10 points, which pushed investors into high-value capital caps (LECAPs) as they paid higher prices for these securities than those in the market.

In the database at such a high price it was expected, the official strategy worked. They raised $2.7 billion, which when added to what was raised in previous tenders of the month would amount to $5.7 billion, a 175% increase over maturities and suggesting a strong absorption of the peso.

In particular, regarding this tender. repayment terms were not covered for the first time in the current administration. “Not only that, the Treasury did not include as net financing in today’s tender everything that was issued by the IDB in the last rounds. Moreover, this is the first negative net financing. For a while. But this is true,” explained economist Gabriel Caamaño. The US$2.78 billion repayment could not be fully covered by the US$2.74 billion awarded (98% rollover estimate).

The combination of rate cuts and peso absorption to reduce inflation is unorthodox, but the government believes it will succeed in calming rising prices.

LECAP’s qualifying yield is currently 4.1% monthly for those expiring in March and 4.4% for those expiring in November. Between the two letters they absorbed 70% of the awarded funds. With term rates collapsing, it is not surprising that small and medium-sized investors have chosen the dollar. For this reason, the “blue” rose by $20 and closed at $1055.

According to Salvador Vitelli, financial analyst and agribusiness expert, “fixed rates above market rates have been confirmed. This tender is causing some concern. Taking into account the issue that the Central Bank had to carry out recently, the absorption of pesos was less than in the previous tender, when they took $1.7 trillion from the market. They were now unable to cover $1.1 billion in secondary market purchases of BCRA securities. In short, the Central Bank sold reserves against Treasury securities.”

An analyst estimates that the cost the government took on in the tender was $150 billion as a result of the high prices that had to be paid to renew the bonds.

According to the Center for Policy Research, rate cuts “are not only aimed at controlling inflation, but also at eliminating outstanding liabilities and reducing the quasi-fiscal deficit” that the Central Bank creates.

The rate cut did not hide the evil that came from the US and affected sovereign bonds. North American GDP growth was 1.5%, well below analysts’ estimates, and this means higher inflation in the future. North American Treasuries responded by pushing yields to 6.75%, their highest level since the early days of September last year. Jerome Powell, the president of the Federal Reserve, warned that they would not cut interest rates until at least the end of the year, a move that has affected all developing countries.

Thus, AL30D, Bonar’s most representative, lost 0.6%. The Global 2030 index, which includes New York legislation that has the greatest impact on measuring country risk, lost 0.8%. Thus, the risk increased by 29 units (+2.4%) to 1234 basis points. This is the third straight round of declines in sovereign securities, the investment most valued by local investors and foreign funds.

A report from Adcap Grupo Financiero noted that the “bond market was on offer throughout the round” and that the decline in major bonds reached nearly $3 below Monday’s highs. This means a drop of 5%. They fell less than 7.5%, increasing country risk.

F2 consultant Andres Reschini said that “with high-frequency food inflation measures collapsing, inflation is also expected to decline significantly.” basicThe central bank again recalibrated the monetary policy rate, reducing it from 70% to 60% annually, equivalent to an effective rate of 82.1%. This ensures that the blender does not lose efficiency and also with certain time since he did so before the Treasury tender. The rate cut hit futures, which corrected to losses of 2.9% in February next year. “Both inflation measures and falling rates are putting downward pressure on the futures curve.”

Financial dollars reacted higher at the end of the wheel as buy orders emerged from investors looking to get out of the market. trade (sell dollars and invest pesos to then make a profit in local currency and return to the dollar). There was too much rush to cancel carry and MEP increased by $18.75 (+1.8%) to $1,034.06. Cash with settlement (CCL) increased by $26.9 (+2.6%) to $1,080.88.

The free foreign exchange market (MLC) traded US$404 million, of which importers took US$349 million and the Central Bank bought only US$57 million, allowing it to increase reserves by US$78 million to US$30.095 million.

Among CER-adjusted bonds, growth was important for the shortest duration, that is, the one that exceeds rates. In the second quarter of 204, shares rose 1.84%. Fixed rate bonds such as LECAP were the most popular and rose 2-4%.

According to Nicholas Cappella, dealer Investing in the stock market “we understand that the market is starting to move away from the CER curve because it has 2 risks: a) disinflation, which comes very quickly and makes us think that carry may accrue in the future; b) The high level of parity that the shares support, and it is unknown how long it can be maintained. We understand that point b) is gradually becoming increasingly important among investors as rates and carry they keep falling. We will be watching closely how the CER curve performs as it leaves us with several questions.”

The Bopreal Series 3 bonds, which are used to repay debt owed to importers, have undergone a tender process that shows they have lost their original strength. Yesterday’s tender offered $113 million. After this meager result, Central announced that it was assessing whether companies that would have to distribute dividends or distribute profits abroad would participate in the next tenders. This bait may prove effective at the next tender on May 6th.

Meanwhile, the stock market performed well, showing remarkable business growth. The Merval index of leading stocks rose 3.5% in pesos and 2.6% in dollars. The most popular shares were Banco Supervielle, whose quotes rose by 7.10% on rumors that Banco Macro would buy them.

ADRs (certificates of ownership of Argentine shares listed on the New York Stock Exchange) showed positive dynamics with a slight overall increase.

Today, the market is expected to be cautious heading into Monday due to the attitude towards the Basic Law, which Congress will discuss on Monday, as well as the already mentioned trading costs. Bopreals have also not helped the faith of investors, who notice that more and more carrots are needed to attract them.