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The free fall of the blue dollar drives the rally in sovereign bonds, which ones does the city prefer?


In the last tender of the BOPREAL 2 US$1,170 million were successfully raised, which were settled in national currency, contributing to the fall of the dollar. In this process, the Central Bank (BCRA), the issuing entity of the bond, withdrew nearly $1 billion from circulation, equivalent to 9.3% of the Monetary Baseaccording to calculations by the Head of Research of Romano Group, Salvador Vitelli.

“Given the results of these last two tenders, and the broad interest in the instrument, we think that the Central will not have any problem in covering the nominal amounts that remain to complete the maximum agreed amount,” they maintain from Personal Portfolio Investments (PPI).

Furthermore, the international context, which at the beginning of the week presented challenges due to inflation data in the United States that caused an increase in 10-year rates on Tuesday, reversed, supported the favorable performance of Argentine bonds.

Bonds: which ones does the city prefer?

The bonuses hard dollar They advance at a steady pace. Among the drivers that explain the rise we can mention “the inflation data that shows a slowdown, the recomposition of reserves and mainly the January fiscal data that according to the statements of the Minister of Economy and the first data from the Congressional Budget Office look very encouraging,” says the research area of Invest in the Stock Market (IEB).

In relation to debt in pesos, although bonds offer negative returns in real terms given the low rates of the economy, “During February they obtained very good returns in dollars given the 8% drop in the CCL“, adds IEB. Thus, the city broker maintains that “The bonds that obtained the best returns in dollars were the long CERs“. The TX26 accumulates a gain in dollars of 16% so far in February.

Thus, as for bonds in foreign currency, the rally in sovereign securities continues. In general terms, they gained 3.3% for an increase of 3.7% in the New York law and 2.7% in the Argentine law. Thus, they have accumulated a gain of 5.2% so far this month and 9.9% so far this year. The parities average 41% and the country risk decreased 35 bps to 1895 bps, Cohen maintains.

In an unfavorable international context, the Globals rebounded strongly this week and compressed the legislation spread GD30-AL30also reflecting that the offshore market chooses to believe”explains the report from Consultant 1816 this Friday.

Even so, we must not lose sight of the fact that “dollar bonds“They still contemplate in their prices that Argentina is going to end up restructuring debt, so there is a lot of upside potential if the Milei Plan is successful, adds the consulting firm.

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It is interesting how the market increasingly values ​​the flow of 2030 bonds: The GD30 is already worth 11% more than the GD38 despite the Indenture differential and 27% more than the GD35 (that is, nearby flows are valued much more than low parity).

“Global 2030 gained so much ground in relation to 2035” that, unlike what the consulting firm projected a month and a half ago, there are now beginning to be scenarios of normalization of yield curves (with exit yields in the area of ​​12-14 %) in which Global 2035 would have a similar or greater upside than 2030 due to its greater duration and convexity.

However, 1816 reminds that, as It is impossible to know what shape a Hard Dollar curve would have with access to international credit and at what level it would be located. (to a large extent it would depend on the 10-year Treasuries rate and the Global EMBI) “We continue to lean towards the GD30 to bet on a normalization of sovereign credit“.

Scenarios for debt in dollars

A report prepared by the stock exchange company Allaria Ledesma outlined three possible scenarios that could influence the prices of bonds issued by Argentina and denominated in dollars.

  • Optimistic scenario: approval in Congress of a comprehensive set of macroeconomic reforms would be achieved, which would include labor and pension, a financial fiscal surplus in the first year, the elimination of the monetary issue to finance the Treasury and an increase in net reserves from trade in the first year of US$10,000 million. These measures would allow the national government to access international capital markets to refinance its maturities in 2025.
  • Unfavorable scenario: In this case, during the first half of 2024 the approval of the reforms mentioned above would not be achieved, the deficit and monetary financing would persist. An attempt would be made to close the exchange gap abruptly, generating higher inflation and exchange restrictions. In this scenario, access to international markets would be compromised. Due to the increase in maturities, a new bond exchange would be carried out with a 30% cut in the nominal capital (following the line of countries that restructured with IMF loans) and the repayment period for the remaining capital would be extended to 10 years.
  • Base scenario: In this intermediate scenario, during the first half of 2024 not all the necessary macroeconomic reforms would be achieved, but some would be implemented. Given the increase in debt capital maturities, a debt exchange would be carried out without a capital cut, with an annual increase in the interest coupon of 1%, and the capital payment term would be extended to 10 years.

A new Treasury tender

To close, It is worth remembering that this Friday, February 16, a new Treasury tender will be carried out. The Ministry of Economy faces maturities of $2.4 billion, once again offers the same zero-coupon Boncer awarded on January 30 (TZX26 and TZX27) and adds the reopening of the Lecer X20Y4indicates 1816.

With the BCRA’s commitment to be in the bid 200 bps above the last cut-off rate of the primary market, the CER running above 20% monthly until at least mid-March and the opportunity cost at single-digit rates, The incentive is still to enter the TZX26 primary. The risk is that in subsequent tenders the rate will rise and that with it the Central Bank’s bid will run.

As mentioned earlier, certain points at the local level favored the notable escalation of debt in dollars. Beyond the legislative stumble that the reversal of the omnibus law meant, analysts consider that The dollar debt segment incorporated the positive signals of recent days.

In this sense, “January’s relatively low inflationthe good fiscal outlook for January, the accumulation of dollars from the Central Bank and the weekend rains in the core area”, are factors that could have positive influences on the prices of Argentine assets, PPI concludes.





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