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IMF ratifies exchange plans and the portion in hand of banks grows

The International Monetary Fund (IMF) confirmed in its Staff Report that the Government will execute a plan to postpone part of the debt in pesos that matures this year. This measure was already under analysis since the beginning of the year, when Minister Luis Caputo and Secretary Pablo Quirno met with bank representatives to propose a mega debt swap in pesos. The negotiation was later confirmed by Caputo himself. The bottom now it has set it as a structural reference point to be met between now and the end of March.

The report with the fine print of the technical agreement with the government of Javier Milei was published this Thursday by the organization after approval by the Board of Directors. In the financial policy section, he notes: “Authorities are moving away from exchange rate-linked bonds toward inflation-linked bonds, while seeking to gradually shift to fixed-rate securities and widen the Treasury bond yield curve. To this end, they will develop and execute a plan to extend the maturities of a portion of the internal debt that matures this year.” For the remainder of 2024, maturities in pesos amount to $57 billion.

In this framework, negotiation with bankers is key for the economic team. Although the majority corresponds to entities of the state sector itself, The portion of the debt in Treasury pesos in the hands of banks gains ground. It already represents more than half of the stock of public securities held by private creditors and, In the last tender, the financial entities kept at least 88% of the bonds placed. It is not coincidental. The trend responds to the strategy of the Government and the Central Bank to promote migration of financial institutions from the Passes issued by the BCRA to the securities tendered by the Ministry of Economy to compress the quasi-fiscal deficit. In the market, they warn about the risks of betting.

According to data from the Ministry of Finance, at the close of Alberto Fernández’s government, the public sector was a creditor of 71.6% of the nearly $80 billion in sovereign securities in pesos (at a fixed rate, tied to inflation, to the official dollar and dual). The largest portion corresponded to the BCRA: 31.1% of the total. It was followed by the Anses Sustainability Guarantee Fund (FGS) (24.1%) and Banco Nación (10.4%). Private creditors had 28.4%. Among them, banks stood out, with 14.9% of the total. Further behind were mutual funds (3.5%) and insurance companies (2.2%).

Thus, based on different official incentives, financial entities came to represent last year more than 52% of the stock of debt in pesos in the hands of private holders. Although different analysts point out that its weight increased with the strategy of the current Government. Javier Milei, Luis Caputo and Santiago Bausili decided to promote the migration of banks from overnight passes to longer Treasury bonds to reduce the remunerated liabilities of the BCRA as a prior step to lifting the exchange rate, also committed to the IMF.

Debt, banks and risks

Proof of this is that this week The Central extended the term of liquidity insurance (known as puts or purchase options) until 2027 for banks to massively enter the Treasury tender this Tuesday. And so it was: of the $1.35 trillion that the Ministry of Finance raised with inflation-adjustable bonds for 2026 and 2027, the entities took at least 88%. This was calculated by economist Javier Giordano based on the puts that were subscribed the next day in the offer made by the BCRA for just over $1 billion.

These puts are a kind of liquidity insurance that banks can buy to ensure that the moment they want to get hold of the pesos, the monetary authority is on the other side as the buyer. An incentive for them to enter Treasury tenders. But they are not a new tool; It was already used before. Until this week, the maximum term of securities backable with purchase options was the end of 2025 and now they have been extended until 2027.

In fact, the consulting firm 1816 reflected in a recent report that “the puts awarded by the BCRA as a percentage of the stocks placed by Economía in each tender grew significantly in these (less than) two months of the Milei Presidency.” According to his calculations, in the placements of October and November 2023 they represented between 35% and 39%. But in Caputo’s first three tenders they were always between 77% and 87%.

“It is this change in the roles of the banks (from Pases to Bonceres) that partly explains why the BCRA’s liabilities in pesos fall,” said 1816 and estimated that the stock of remunerated debt of the Central measured at the CCL exchange rate is already is located barely 5% above the 2003 floor. Another part of this process is explained by the strong liquefaction of savings (with single-digit rates that are losing by a landslide against runaway inflation), the brake on monetary assistance to the treasury and the dollarization of liabilities through BOPREAL.

However, as Ámbito said, in the banking sector some sources indicate that the puts tool is not without risks. And economist Leandro Ziccarelli summed it up like this: “As long as things are going well, it’s not that problematic. The issue is that, if at any point things get complicated and the banks turn around, they automatically force the BCRA to reissue everything previously rescued by the Treasury. We go back to page 0, because that basis that you issue that same day goes back to Passes.”

On this point, the agreement with the Fund proposes a “reinforced zero ceiling” for monetary financing of the Treasury. The organization’s report says that, in addition to the temporary advances and profit transfers, the BCRA committed to stopping purchases of public debt in the secondary market (although this week the Central Bank set a parameter on which it would intervene). And he points out that the bond purchases related to the execution of the puts “are expected to be fully compensated by the government’s repurchase of securities held by the BCRA.”

Beyond liquidity insurance, analyst Christian Buteler highlighted some of the systemic risks entailed by the commitment to make banks migrate. “The aim is to stop issuing money to pay interest. Although this forces the Treasury to have a surplus so high that it can pay the interest with that and not ask the BCRA for money. But that generates others risks, such as banks’ overexposure to the Treasury. And behind the money of the banks are the placements of the people”said Buteler.

And he added: “When you want to dismantle the Leliq/Passes, that excess money has to go somewhere. If they go to the Treasury, the BCRA balance is freed up but, at the same time, we will begin to see that the banks are overexposed to Treasury debt. Because what the Treasury owes you is not the same as what the Central Bank owes you,” which can issue its currency. Furthermore, he recalled that the Treasury “has a history of re-profiling or defaulting; There is no longer even the message that he never defaults on debt in pesos, he even did that in 2019.” For this reason, the financial specialist warned that ““Faced with a problem with Treasury debt, the possibility of contagion to banks and having a run on deposits is high.”.

Debt: how is it going?

Meanwhile, for official debt policy, banks become a determining actor. That is why, weeks ago, Caputo began to analyze with representatives of the entities an exchange of titles in pesos that expire this year, which the IMF is now coming to ratify. In addition to reducing the pressure of having to refinance payments month by month, the Government could use it to reduce part of the interest on the fiscal account towards the financial balance committed to 2024, for which it is already proposed to make a drastic adjustment to the population. .

Eventually, for there to be a significant percentage of adhesion to the exchange on the part of the private sector, it will be decisive that there is a high participation of the banks. Sector sources consider that this week’s tender for long inflation-linked bonds combined with puts was a way to test the waters with a view to a future launch of the conversion.

However, they warn in the banking sector that, after Milei’s renewed messages about dollarization, “they will have to provide a lot of clarity about how the bonds would be paid in that scenario.” In this regard, the consulting firm 1816 stated that “from the point of view of the financial system, we must not lose sight of the fact that the risk of dollarization does not change much by swapping Leliq/Pases in the hands of banks for Boncer in the hands of the same banks.” . Faced with a possible change in the monetary regime, he concluded that the Government would have to “convert these stocks into dollars” and that, to avoid a Bonex plan, it would be “necessary for savers not to run against deposits and/or for the country to have financing.” external enough to face an eventual bullfight.”


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