City Guru Foresees What Could Happen to the Dollar and Recommends This Investment

The American economy shows that inflation is untamed, US Treasury yields are rising, the 6-month rate is 5.3% per annum, while the 2-year rate is 4.88% per annum and the 10-year is 4.5. % annually. The market has lost appetite for US Treasuries and tenders are not attractive, which is another reason for the rate hike. To this we must add that the performance of banks was not positive, and this marked the beginning of profit-taking in 4 US stock indices.

In this context, Argentina saw sovereign bond prices fall in an international context that was clearly unfavorable to it. From a fundamental perspective, sovereign bonds should continue to rise as we are on the cusp of the government posting its third positive fiscal result and consolidating the central bank’s balance sheet.

Reserves will soon exceed US$30 billion, with a soybean crop of 52 million tons and premium corn about 20 million tons. Soybeans will begin arriving at the port in significant quantities next week. firm, and US$1.940 million towards the debt to the IMF will be able to be paid.

The Central Bank of the Argentine Republic reduced the monetary policy rate to 70% per annum, this led to a drop in the fixed rate to 60% per annum, which implies an effective rate of 79.5% per annum.

The Central Bank’s Survey of Market Expectations (REM) shows that the inflation rate in March 2025 will be 120.9% per annum for the average consulting firm, while the top 10 best-performing advisors are projected to be 130.3% per annum. . From our point of view, inflation as of April 2025 will be 122.4% per annum, this means that if we do a fixed term, we will get a negative interest rate of 19.3% compared to inflation. Those who put off a fixed term lose everything, the only people who save are those who do a fixed term UVA, which takes inflation into account.

The devaluation rate we estimate as of April 2021 is 81.1% per annum, which is almost equal to the effective term rate, which is 79.5% per annum.

In the Treasury’s latest tender, the inflation-adjusted peso bond due in December 2025 left an interest rate equivalent to inflation minus 13.3% per annum, better than a fixed term of more than one year. leaving you with a negative interest rate against inflation of 19.3% per year. The lecapas, which are capitalized peso notes due October 2024 and February 2025, are yielding 64.2% and 67.0% per annum. In both cases, these notes pay lower rates than the 30-day fixed terms, giving an effective rate of 79.5% per annum, indicating that the market suspects the interest rate is likely to decline.

In the Treasury tender, the tender for wholesale dollar-regulated peso bonds due June 2025 was invalid. This explains that the market does not believe that the government is going to immediately devalue the peso.

In this context, inflation-adjusted peso bonds and dollar sovereign bonds continue to be two good savings options as the government continues to post budget surpluses.

In the financial market, bills of companies denominated in dollars with a 180-day rate of return of 8.0% per annum. These notes are very attractive because they are primarily guaranteed by mutual guarantee companies (SGRs). These notes compete directly with negotiable obligations, which provide single-digit yields through 2026.

The CCL dollar seems to have found a floor: if you import goods and pay with the CCL dollar, you don’t pay the country’s tax. If you import through the free exchange market (MLC) you do so at a cost of US$870 plus national tax of 17.5%, which gives us US$1,022.25, while CCL costs US$1,050, although there is a difference is minimal because you pay CCL in one payment, but with MLC you have to pay in multiple payments and this is very burdensome for the supplier.

This will create demand for the CCL dollar, which will ultimately cause the MEP dollar to rise. It is equally true that there is a proposal from exporters in MEP and CCL dollars due to the rule allowing exports to be calculated at 80% in wholesale dollars and 20% in CCL or MEP dollars, however, we believe that the dollar in these dollars values ​​seemed if it had reached the floor, it would be difficult to break through. One could say that $1,000 is the floor, but at this point we cannot foresee a strong recovery from current levels.

In June, the elimination of exports at 80% wholesale dollar and 20% CCL dollar will be completed. This will lead to unification of the exchange rate, which may be disadvantageous for exporters who will lose some price. Be careful with competition.

conclusions

. – The government does not seek devaluation to pay off debts or increase competitiveness. He will do this by cutting taxes when he can.

. – The government is cutting interest rates because it sees it has a sharp price decline scenario in the future, and as a side effect it is looking to restore lending to the market to push towards a reactivation scenario.

. – Sovereign and inflation-adjusted peso bonds may continue to rise, the international scenario is against this, but everything can be overcome.

. – The soybean and corn harvest will provide a large influx of dollars with reserves easily exceeding US$30 billion and we will have no problem paying off the IMF debt.

. – The low dollar is not going anywhere, so we have to look for investment options, construction is being carried out at reasonable prices, buying a finished apartment seems like something very worthwhile. Exporters must strive to be competitive through increased investment and better management.

. – Stocks are on hold and have room to rise, but it is critical that Congress passes laws to encourage money laundering and encourage investment in certain sectors.

. – Changes in economic policy force us to look at investments from the other side, the dollar is an investment of the past, and we will have to look for more complex methods of making money in a transition economy that strives for financial balance and capitalization. Central Bank, and paying off past debt is neither easy nor possible. Investment will be the key.