Without waiting for the effect of the peso debt swap, the market continues to hedge in dollars

The finance secretary, Edward Setty, had hedged early by planning a swap of 50% of Treasury debt. The end result was 64% and it was not a success, because of the $7.5 trillion in bonds that were offered, only $4.34 trillion had their maturity extended to 2024 and 2025.

The participation of the official banks, the Nation and the Province, was essential. Among the privates, Credicoop stood out, which is to be expected since its owner is a ruling party legislator. Santander, Galicia and ICBC also participated.

“I thought they might have more grip. I expected 70%. My disappointment is that the banks had to be granted what they were asking for: double obligations, put (to be able to sell them before expiration) and establish reserve requirements with new securities, except for those that adjust to the dollar. To make finer figures, the privates who hold half of the bonds brought 15% of the swap, that is to say that 7 out of 10 private individuals did not accept the swap”, declared the financial analyst and expert in agro-industry, Salvador Vitelli.

“In the future, we could see the Central Bank buying securities in the secondary market that cannot incorporate the reserve requirements that banks part with to obtain pesos. We are going to see a rotation of portfolios where the stocks that will suffer are the tied dollar that they cannot integrate the reserves,” added Vitelli.

The exchange closed two hours later than expected to reach this membership amount. The official explanation was that it was done at the request of the funds and the banks.

The problem is to know how the exchange transforms the structure of the financial sector because from now on the banks will be able to constitute the reserve – percentage of the deposits which must be maintained immobilized with the Central Bank – with bonds of the Treasury. The fixed terms will be backed by Treasury bonds that go to the Central Bank. Although the peso reserve is more expensive for banks, it gives quality to the guarantee of deposits. In other words, the Treasury will be the guarantor of current account deposits and term deposits, and it takes away its essence from the swap function. The operation hides funding from depositors at the Treasury.

The market, even without knowing the outcome of the auctions, continued to hedge with dollars as the Grain Exchange linked to the United States Department of Agriculture and the Rosario Stock Exchange made its downward adjustment in the harvest estimates. MEP rose $2.57 (+0.7%) to $375.43 and cash with settlement jumped $8.82 (+2.3%) to $381.78. Financials traded higher than “blue” which fell $5 to $373. This is the third consecutive rise in alt dollars and the magnitude is growing.

Debt bonds, on the other hand, continued with declines of up to 2% and raised country risk by 36 units (+1.7%) to 2,134 basis points. They are back to the February 22 level.

In the wholesale market, the dollar rose 37 cents to $200.37. The devaluation rate did not change, but the Central Bank had to sell $47 million. Reserves, under these circumstances, fell from $88 million to $38,178 million.

The fall of the New York Stock Exchange, due to the fear of the investors vis-a-vis the losses of a bank which counts among its customers of the companies of new technologies, moved towards Argentina.

Shares traded a steady $4,094 million and the S&P Merval, the main stock index, fell 1.33%.

Business in ADRs – participation certificates listed on the New York Stock Exchange – increased to 9,680 million dollars due to the increase in the dollar counted with liquidation, which is taken as a reference for these operations. The losses were crushing. Only two of the main certificates emerged unscathed: Corporación América (+4.4%) and IRSA (+0.6%).

Today, the dollar will reflect the result of the exchange in its prices. The frame doesn’t look the prettiest.

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