Monday, December 6

Banco XP Investment anticipated a rally in Argentine bonds if the agreement with the IMF is confirmed before March

“It is important to remember that Banco Galicia, for example, it rose 1,208% from 2013 to January 2018, after the loss of Kirchnerism in the 2013 mid-term elections and the subsequent election of former president Mauricio Macri, “said XP.

On the fixed income side, restructured bonds have no real carry (very low coupons), but Global bonds to 2030, for example, are currently yielding 14.4% to maturity (something “pretty decent,” he says. ). “We believe that these bonds could rise in the scenario that Argentina can sign an agreement with the IMF before the large amortization of March 2022 expires.“, he remarked.

However, they also raised what would happen if the agreement is delayed: “Argentina without an agreement with the IMF is not a viable country. Therefore, we are almost fully convinced that there will be an agreement. The question is whether this agreement will be finalized ex before if the country explodes completely, that is, if an agreement occurs before the second quarter of 2022, or if it occurs after Argentina is completely submerged in a chaotic economic and financial situation that forces the ruling coalition to ask for help. from the international community, “explained XP Investments.

“Some market experts tend to believe that a defeat in the election will further empower Kirchnerism and therefore more populism will prevail. The problem we find with this view is that it assumes that Kirchnerism is unable to understand that without an agreement with the IMF, and with a practically zero net balance on the reserves front, it will be impossible to maintain some kind of financial and external balance, “they assured.

“We believe that Argentina without an agreement with the IMF would necessarily reach the presidential elections of 2023 under an economic depression, with draconian levels of financial repression, and most likely with very high levels of poverty (higher than those already alarming). We believe that such an economic environment would make the prospects for Kirchnerism facing the presidential elections of 2023 very dire“, razona XP.

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