He financial quagmire to Wall Street for the fall of the bank Silicon Valleythe same week that INDEC will announce the February inflationwhich should be close to 6% with a year-on-year greater than 100%revived the discussion at the Central Bank on the application of a increase the interest rate reference.
The debate will take place on Thursday during the meeting of the board of directors, and it will be two days after the knowledge of the price index of the second month of the year and a week after the completion of the bond buyback in pesos, which had an effect on the medium and long-term curve of Treasury securities in local currency.
Domestic debt management has a direct impact on the interest rate set by the BCRA in the Leliq. This occurs because a mandate that follows the direction of the entity, at the head of Miguel Pesce, is that the Central Bank adjusts its rates so as to favor the financing of the Treasury in its usual calls for tenders. If the BCRA had too high an interest rate, it could go against this intention.
However, monetary authority sources assured GlobeLiveMedia Although it is not possible to confirm that this Thursday the board will eventually readjust the interest rate, the question back to the debate within the organization, after having considered for several months that the level of interest offered by its reference courses in pesos was at an adequate level (positive in real terms) relative to the rate of prices.
Close to Pesce, they claim that the BCRA was looking “plug” the level of rates even given the prospect of a slowdown in prices in the first months of 2023. This has not happened and the acceleration in prices, which took the CPI to 6% in January and to 6% additional -projected- in February now changed the panorama and put on the table the possibility of a rate readjustment.
“It is in discussion For now, I see a slim chance of downloading it, but it’s not closed“, said a member of the board of directors consulted in this regard. The same source assured that in addition to the February price index which will be released tomorrow, the financial volatility triggered by the drop in the Bank of Silicon Valley and which dragged down Argentine assets “adds a additional condimentto the internal debate at the BCRA.
If there was a change in interest rates, a period of time would be interrupted. six months unchanged. On September 15, the interest was parked in 75% rated annually (one 6.3% per month cash) after an overbidding authorized by the BCRA – and in parallel by the Treasury in its calls for tenders – and from that moment the rate did not move.
The International Monetary Fund (IMF) has not ignored the issue. In the document published yesterday, the agency’s staff recalled that “to cope with the continuing inflationary pressures, which have rebounded in recent months, the authorities (referring to the Argentine government) intend to keep interest rates positive official in real terms.
For some private analysts, despite the acceleration in prices in recent months, the interest rate has not moved out of positive territory and it would not even do so against a CPI of 6% in February. Precisely for this reason, there are doubts about whether the Board of Directors will allow a further increase in its discussion, which more expensive credit.
“Although at the end of 2022, the rate showed positive real returns (ex-post) in the face of the temporary fall in inflation, such a dynamic has found a inflection point in the first months of 2023 due to the further acceleration in prices”, estimates a report from Ecolatina.
“In September-October, the rate followed the monthly price movement, only to post positive returns in November-December, when the possibility of a rate cut was even considered due to the marked slowdown in inflation. However, with the recent price overheating, the rate has been just above inflation in January and, according to our price survey, something similar would have happened in February,” the consultant pointed out.
“Depending on the inflation that we factor into the analysis, some real rate measures show that the BCRA has (for now) some room to keep the rate at current levels without giving up a positive real return,” Ecolatina said.
At the same time, this Monday continued the process of swapping debt into pesos announced on Thursday of last week, and for which the Ministry of Finance authorized the 61% peso bond maturities expected for the quarter April Junewhich has concentrated some of the most demanding payment “towers” – including many private sector holders – for the coming months.
This Monday, until the close of the market, the holders of the securities eligible for the conversion operation had time to “send” their old bonds. The deposit of the new securities issued by the Treasury will take place on Tuesday, which will include a basket of bonds which only follow the evolution of prices and another which mixes indexation on inflation and another bond which also protects against a possible devaluation. The variant most chosen by holders, little difference (52% to 48%, estimated in official dispatches) was the CER basket.
Last Friday, in this sense, the Central Bank published”put” (put options) in favor of the banks which acquired the new bonds. According to information from AdCap Grupo Financiero, they would cover 22% of the new securities put up for auction. It is a financial tool by which the holder of a bond can choose to sell his asset to the BCRA before a need for liquidityin exchange for a premium to be paid by the entity that acquires it.
“The Central Bank issued put options last Friday for the equivalent of 22% bonuses granted by the Treasury as part of the local currency debt swap, suggesting that private banks were covering your entire allowance. The greatest demand for put focused on double bonds due February 2024, with 31% of the allocation,” AdCap said.
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