Financing the Treasury increases the risk but they do not believe that there is a default on the debt in local currency. Instead, they warn about the monetary issue
With its sights set on next week, the Central Bank (BCRA) is working on encourage financial institutions to buy bonds Treasury. Sources of the organization that leads Miguel Pesce did not rule out that the changes are ready for the first tender in May, announced for next Wednesday 6.
The measure would have two parts, although both the BCRA and the Ministry of Economy assure that it is still being studied. On the one hand, a reduction in the Central’s remunerated liabilities in the hands of the banks. This refers to the holding of Leliq, whose balance amounts $ 1.3 billion, or passes, that are around $ 700 billion.
According to sources from the BCRA, iProfessional, passes are those that have more chances of suffering disarmament, driven by a drop in rates. If this movement were to materialize, it would be a reversal from the pass performance increase That was done last week, when it went from 11.4% to 15.2%.
On the other hand, at Central they study the possibility of making lace changesThat is, the portion of the deposits that immobilize at zero rate in the BCRA. In that line, one possibility would be release weights for banks to allocate to bonds issued by the Treasury.
“As much as they release liquidity, without short-term instruments, there is nowhere to go. In emerging economies, banks have approximately 10% holdings of bonds over assets. In the default years they can increase up to 15%, since the rates are high and the loans are not in demand, “explained a bank operator.
And he added that “the bonds can be re-profiled”, therefore, he maintained: “No matter how much liquidity a bank has, going to be careful with bonuses. Especially in a year with possible default. “
Miguel Pesce, head of the BCRA, set his sights on the banks
This prudence of financial institutions has to do with Central regulations and with the very conception of risk since, ultimately, banks do nothing but broker the money of their depositors. That is why they want to avoid taking greater risks.
“A part of the deposits can be considered core and lend or use them to buy bonds. This is done with what the bank believes will not move. The rest should go to short assets because if there is an outflow of deposits, there must be liquidity“, synthesized in an entity.
At another table, meanwhile, they ruled out that the exchange of passes or Leliq for bonds in pesos creates a significant danger for depositors.
“Banks use deposits from individuals and companies. It is logical that the BCRA means less risk than the Treasury national simply because, to date, it has not incurred any default. Something that has happened with the Treasury, so, strictly speaking, banks are going to place their clients’ deposits in riskier assets. Anyway, I see how unlikely a default in national currency. Either for the credit of the BCRA or the Treasury “, they affirmed.
Central sources stressed that the changes being studied do not put savers at risk because they would not change any of the prudential rules, which limit exposure to public sector credit to 50% of their assets. Rather, they argued that banks have space to invest up to $ 300,000 million in securities public under current regulation.
Give depth to the local debt market
In Economics, they aim to design a financing strategy through a peso capital market, but the focus of Martín Guzmán’s portfolio is on debt renewals at rates as low as possible. The minister anticipates that it will lack external financing and begins to outline your strategy.
Something that it is not clear is if the public titles that the banks buy can be integrated as part of the reserve requirements, something that has already been done in the past with the Bote2020. If the idea is to strengthen the local currency debt market, using bonds as reserve requirements would not be the most appropriate option. On the contrary, Economy would ensure good demand at low cost from financial institutions.
This was explained by a bank operator: “When the bonds enter against reserve they compare with a rate of 0%, banks can pay anything to avoid 0% compensation. Thus, they trade outside the curve for a technical reason. Furthermore, they have little secondary market because they are embedded. Therefore, when they put that condition on it, it doesn’t do much to make a curve. “
Guzmán’s portfolio has been offering yields of around 30% on the bonds he placed lately. In this sense, and in light of the regulations being prepared, Mariela Díaz Romero, senior economist at Econviews, pointed out: “In January, the Treasury issued at 30% and was neither attractive nor market-based because the other rates were higher. Now, with all the yields down, the banks do not find bad a bond with a 30% rate”
More pesos on the street
Despite the fact that the details of the regulations remain to be outlined, in the corridors of Reconquista 266 they know that these measures will put more pesos on the street.
“This operation would be similar to what Luis Caputo had done with the TN20 (Bonte 2020), the bond fits. The good thing is that now the bonds have some liquidity in the secondary market, something that did not happen with that title, “Díaz Romero interpreted.
And he added: “The bad thing is that this is not monetary neutral: the Leliq sterilize; the bonds, if the banks have them, give financing to the Treasury and those weights circulate. However, it is true that it takes weight from the BCRA, which should not issue much more for Treasury expenses. “
In that line, in the BCRA they resign themselves to the fact that it is a matter of exchanging one issue for another. The agency has been financing the Treasury through transitory advances and profit transfers. Now it will inject by means of a disarmament of its remunerated liabilities or a liberation of reserves.
Alert for monetary issue
So far this year, the monetary authority issued $ 312 billion for transitory advances and is near the top set by the entity’s charter, according to which the BCRA can draw up to 10% of the monetary base and 12% of the collection of the last 12 months.
However, the profit transfers they have a looser limit and the BCRA ー which has already expanded $ 210 billion for this concept in the first 4 months of the year ー could continue financing the treasury in this way.
In addition, the BCRA had already injected more than $ 300 billion with the intention that the banks allocate those pesos to loans to mipymes. The system was slow to start up and generated unrest in government authorities.
The price reaction
With these novelties in sight, bonds in pesos scored increases in the two days of this week. Today, the local currency sovereign curve gained between 5% and 6% on average. About, Joaquín Candia, from Rava Bursátil, explained that the rise was due, in part, to the fact that today the payment of the Boncer 2020 (TC20) was credited.
The dual bond (FY20) was the one that rose the most on the day, with an increase of 22.4%. “ANDhe investor optimism is based on the fact that the bond it is paid in pesos but in reality the issue is in dollars“Candia pointed out. And warned:” You can fall into the restructuring of debt under local law and back down sharply if this happens. “
The S&P Merval advanced more than 10% today, driven by bank stocks
On the side of banksthere was also go up in the two days of this week. Today, the roles of Macro (+ 18.2%), Galicia (+ 16.9%) and Supervielle (+ 12.5%) were among the best performances of the day.
“The S&P Merval grew 10.4% driven mainly by the banking sector, which saw its prices increase between 12% and 16% after the Central Bank was working on pay more for lace integrated with treasury bonds which would make the banks obtain better returns while the treasury is financed and speculative investment is avoided, “Candia said.
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