Monday, December 6

Bonds: for the market, there will be no recovery without progress with the IMF

In the latest report on the market, AdCap warned that the price of sovereign securities in dollars with foreign law, present a fall of 15% compared to the elections of September 15 last and that they have not managed to recover, except for a glimpse in the first 24 hours after the 14-N result.

Gánadara argued that “There is something good and it is that they stopped intervening in the AL30” and said that “it seems a good sign although beyond that there is nothing.” In this regard, the Adcap economist indicated that “the IMF is very critical of interventions in the market because it considers that reserves are lost, and that is why the BCRA’s latest measure is going in the right direction.”

Gándara indicated that in order for the bond prices to recover positions “a specific model must be presented that shows its bases and that has a political endorsement.”

The AdCap portfolio manager did not rule out that there has been an implicit agreement throughout the year between the Minister of the Economy, Martín Guzmán, and the head of the IMF, Kristalina Georgieva, in the sense of producing an ordering of the accounts along the way. throughout 2021 even if nothing was signed, to avoid paying a political cost to their own electoral base. “Yes as such,” said Gándara, who added that “there may also be an agreement with a gradual reduction in spending that they also mentioned, which they call convergence.” In fact, if you take some data on the accumulated deficit in the first 10 months, according to an analysis by the Congressional Budget Office (OPC), the primary is down 60% compared to last year.

One of the central points would be the reduction of subsidies to energy companies and therefore, the prospect of a rate hike and a recomposition of the companies’ profitability could drive an improvement in the share price. However, Gándara assured that “today in agreement with the IMF it will not be sustainable if it does not have a political anchor.”

The latest AdCap report notes that “the news about the election result and the comments on the potential agreement with the IMF were not enough to boost the price of these assets” and clarifies that “at this stage of events, after the long and difficult debt restructuring only strong advances will determine the improvement in the prices of these bonds ”.

For its part, the consulting firm GMA Capital warned in a post-14N report that “the price action of the assets was up to par, with a path that was notoriously from more to less.” The consulting firm points out that global bonds and Cash with Free Settlement “were the ones that had best captured the market’s expectations.” “On Monday, bonds had gained up to 3%, while the financial dollar had fallen 2.7%. But the subsequent lack of news of serious advances in economic matters would quickly collapse those improvements like a house of cards ”, indicated GMA. The consulting firm specified that “fixed income returned to mediocrity, with yields that double those of African bonds (22.3% versus 10.5%) and the dollar placed outside the country costs 110% more than an official one.”

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