Another “challenge Lebac” for the Central Bank: renew the maturities with pre-electoral climate and rising inflation


It looks like a game of chess, there are many chips or variables on the board and the Central Bank thinks in detail each movement to execute.

Now, the next important move will be Tuesday, when the monetary entity led by Federico Sturzenegger must renew in its monthly bidding for its bills about $ 381 billion.

A figure that is immense, represents 21% less volume compared to the maturities that had to pay the BCRA in last month’s placement (September).

Therefore, the perspectives of the authority are much more achievable and positive for the tender to be held in the pre-legislative elections next Sunday 22.

An objective data reinforces this perspective: from May 14 to date, in each monthly placement the Central managed to raise more than $ 420,000 million. That is, it far exceeded (by more than 10%) the maturities that it must face on Tuesday.

To this panorama that is based on the “numerical”, is added a political and economic climate that play in favor of the Government, which moves in the confidence of investors to orient themselves to position in pesos.

This optimism is based on pre-election polls, which are very favorable to the ruling party, together with the best prospects for economic growth reflected in EMAE data, construction, employment and industry, among other indicators in the country.

To this is added a fundamental factor: the dollar remains stable throughout October, around $ 17.42 in the wholesale market, and projections are that the year will end at $ 18, according to the consensus of more than 30 economists and national and foreign banks surveyed by FocusEconomics survey.

That is, taking into account that indicator, throughout 2017 would gain a little more than 13%, almost half of the interest rates that are offered by the Central Bank Lebac (26.5% the shortest in the primary tender) .

And at the level of profitability, these letters offer about 3 percentage points more than would be inflation throughout the year, which the consensus of analysts estimated at 22.9% for 2017.

Instead, the green ticket “loses” against the rise in prices for several bodies.

In addition, everything indicates that this Tuesday the high interest rates are held for a while because inflation fails to be tamed.

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In fact, according to the INDEC, in September there was an increase of 1.9%, the highest since last April, and well above the 1.4% of August.

Meanwhile, the accumulated price increase for all of 2017 already exceeds the target set by the Central Bank (a maximum of 17%), as it reached 17.6% in the first nine months.

The color data is that to renew all maturities in the primary tender, Sturzenegger would cut a streak that drags since last March, since since then had to expand pesos to the economy. And then he had to remove it in the secondary place.

Long-term bet
Although in the last months the BCRA did not renew all the commitments in the primary auction, in the following days managed to do it in the secondary market.

Although, of course, in most cases, the monetary entity had to offer a more seductive interest rate than in the initial instance.

This was modified in the last place in September, when Sturzenegger decided to “punish” investors who speculated not to appear in the primary bidding, to expect a better “prize” in the secondary market.

Last month, the Central Bank lowered interest in the days after the primary placement, and the savers who entered the latter lost some basic points of profit.

Thus, the objective of the ruling is to encourage entry into the initial bidding process, which is why it began to change and to show signs of better rates and liquidity in the Lebac’s longer tranches to stretch the maturity dates.

That is, the yield curve was reversed to offer more incentives in the long run.

“The mission is to unpack the snowball of the Lebac, stretching the terms of maturities and lower the amounts that must pay each month, which were about 60% of the monetary base,” summarizes Federico Furiase, associate economist I study Bein.

In short, to generate more demand in longer stretches of Letters, Sturzenegger reversed the yield curve and gave more attractive rates in these longer periods.

In fact, in the last position the shortest period (28 days) provided a gain of 26.5% and in the longest (274 days) gave a 27.35%. Levels that have been maintained since then in the secondary.

The very favorable forecast so that this time the Central Bank can renew all the maturities of Lebac, and in addition to that, extend the terms of maturity of these papers, amid a political and economic context that plays in favor of both objectives.


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