:quality(85)//cloudfront-us-east-1.images.arcpublishing.com/infobae/JA5T2OEY4FDSHPKOWERPE2B4JU.jpg "Yellow lights are coming from the US: Bonds and stocks have fallen and the dollar is getting more complicated")
Yesterday’s celebration in the United States for the commemoration of Presidents’ Day will be a relief for Argentina and emerging countries.
In order not to lose sight of inflation, the government accelerated the rise in the official dollar
The strategy was to favor a slower exchange rate adjustment, but the strategy had to be changed on the fly. Central resists raising rates for now, but would face more pressure to raise them again
Foreign debt securities fell to 4.5% when the average drop in the index of emerging countries, the EEM; was 1.1%. Argentina was by far the emerging market most affected by both data from the North American economy, the increase in retail sales and the increase in wholesale prices.
Country risk jumped 67 units (+3.3%) to 2,123 basis points. A fortnight ago, Argentina was smiling: it had broken through the floor of 1,800 points. The truth is that on January 18, when the decline began, the redemption of Global 2030 bonds was announced to increase their parity and control exchange rates. At that time, the bond was trading at an exchange rate of 33.82%; on Friday it lost 3.5% and closed at 31.47%. So far this month it’s fallen more than 15%, but year-to-date it’s up 10.6%.
The operation (Repo) to obtain 1,000 million USD has fewer and fewer possibilities of being carried out, due to the number of securities that would have to be pledged
The volatility of this bond represents that of all foreign debt securities which do not aim to reach the best moment. At the time Minister of Economy, Sergio MassaHe was so optimistic that he believed he would reach 40% and offered foreign banks to carry out an operation with the guarantee of these bonds (Repo) to obtain 1,000 million dollars and thus avoid the first quarter of the year where foreign currency would be lacking due to lack of exporters.
Dollar and peso debt, the double test that the government will face today in the market
The Treasury will again make a bond offering to refinance a small volume of maturities in February, but concentrated on private creditors. Strong public participation is expected to guarantee the operation
This operation generates more and more doubts because of the number of securities that would have to be provided as collateral. In nominal value, they would exceed 4 billion dollars. Unimaginable for banks to have such a guarantee to cover 1,000 million dollars. The volume generates mistrust and makes the high rate of nearly 15% (10% plus Libor) overshadowed by the risk associated with the decline in the securities in the portfolio.
But the decline also complicates local banks as investors who were invested in dollar bond funds are withdrawing their investments as they do not want to take on more losses.
The contagion of what happened is transferred to Treasury bills. Although the government has agreed with the banks to renew them until 2025, the sovereign is the individual investor who puts money into the fund entities that hold these local currency bonds which pay rates up to 118 % effective per year or that adhere to inflation with titles that pay up to 5% more than the cost of living.
Despite the new rise in inflation, Sergio Massa still believes that it is possible to get a break in the brakes in April
He insists that in three months it can drop to less than 4%. For now, inflation in February would also not fall below the 5.5% to 6% range, especially after the sharp rise in meat prices. The slowdown in prices also has a strong impact on politics and the definition of presidential candidates
From the policy tightening of the Federal Reserve in the United States, which at the next meeting in March could raise rates by half a point instead of a quarter point and promises three more consecutive hikes, the dollars will seek safer destinations than emerging countries.
That’s why the fight Lula in Brazil. The reference rate of the Central Bank of Brazil is at 13.75% against inflation which does not reach 6%. Lula insists that they turn it down, but the entity is self-reliant and resists as he sees the worst future for the region. This rate makes Brazil a better support than the other economies of the domino effect which comes from the United States and which will worsen when the European Central Bank will increase the rate of the euro by 50 basis points.
In the future dollar markets, where the Central Bank is the main player, because it has an IMF-approved quota of $5,000 million to play there, the currency at the end of next January was trading to $422, which equates to an effective devaluation rate of 124% per year.
The pressure for the alt dollars to rise is becoming increasingly intense, spurred by a Central Bank that has left the benchmark rate unchanged and will inevitably have to raise it in order to control exchange rates.
Inflation is also playing its part and threatens to be higher in February. The government has responded with some measures that have proven ineffective in the past, such as an average 35% discount on the popular 7 cuts paid for with a debit card. The problem is that this scheme only concerns supermarkets which represent less than 30% of total consumption. Moreover, as soon as the system was announced, the increases were accelerated so that producers could sit with advantages at the government bargaining table.
This week, with only three trading wheels, will be intense. The watchword for investors is to hedge and stay away from risk
The truth is that on Friday in the wholesale market, the rate of devaluation accelerated for the third round in a row. The dollar rose 38 cents to $193.21. Central had to sell $49 million and reserves fell from $184 million to $39,328 million. Alternative dollars have seen slight setbacks due to Central’s interventions, but they know they have a long weekend ahead of them to see what happens in the U.S., where Tuesday, before markets open , the Federal Reserve minutes will be released. that explain what happened at the last meeting and provide guidance for the future.
US investors took a break. The US bond rate is at 3.82% and leading New York stock market indicators closed lower.
In Buenos Aires, the S&P Merval, the index of flagship stocks, collapsed by 3.25% with deals for nearly 5 billion dollars, a sign that there are hands that worked until this let the storm pass. This week, with only three trading wheels, will be intense. The watchword for investors is to hedge and stay away from risk. This can help the dollar and hurt bonds and stocks.
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