Monday, August 8

Mega-tender: Economy placed debt for $ 219,000 million and closes October with a 106% rollover

The financial team of Martín Guzmán, who left for Rome yesterday to participate in the G-20 summit and meet with Kristalina Georgieva for the negotiation with the IMF, was satisfied with the operation. “This expiration was a very big challenge, in a challenging month in terms of volume and composition. If the bond that we refinanced with Banco Nación in September is excluded (the TS21, a security placed by Luis “Toto” Caputo, which caused the entity to lose $ 140,000 million, as revealed by Ámbito), October was the month with the highest payments in the anus. In addition, almost 77% was in the hands of private holders ”, indicated sources from the Palacio de Hacienda.

For Guzmán’s financial strategy, debt in pesos plays a central role. The increase in funding in the local market is the way it is betting to gradually reduce the monetary assistance from the Central Bank to the Treasury while, year after year, it cuts the fiscal deficit. It is something that the Economic Cabinet considers important to avoid a higher issuance resulting in additional pressure on the dollar and the exchange gap. And it is also one of the IMF’s demands in the ongoing negotiation of a new program to refinance the US $ 45 billion loan that Mauricio Macri took.

Financial program

For this year, the minister had budgeted to cover 60% of the deficit with issuance and 40% with net debt. This pattern was met until July, but in the last three months there was a lower level of debt rollover in pesos (together with a higher deficit due to seasonal reasons and an increase in spending) that led to acceleration of the BCRA’s assistance. Last Friday, for example, the Central sent another $ 95,000 million in temporary advances to the Treasury (see separate note) that raised the share of the issue in the annual financing mix to 74%.

Until yesterday, the net debt in pesos accumulated in the year $ 435,570 million, which is equivalent to a refinancing ratio of the maturities of 115%. After the most demanding months, officials hope to regain ground in the last two months and bring the financing mix as close as possible to the goal of 60% -40%, although they clarify that it is not a strict parameter and the scenario looks complex. In the remainder of 2021, the commitments to be renewed total about $ 590,000 million: about $ 313,000 million in November and about $ 280,000 million in December.

“With the elections dissipated and with a less demanding profile, one could expect that the volume of refinancing will be closer to the accumulated annual than the level of the last few months. The idea is to continue doing what we have been doing. The results accompany us ”, expressed official sources.

Tender details

In yesterday’s mega-tender, Economía received 1,299 offers for a total of $ 253,983 million of nominal value, of which it awarded $ 211,173 million. The bulk of the non-validated surplus corresponded to the two dollar linked bonds offered, which, in view of the investors’ search for exchange rate coverage, had a strong demand that exceeded the issuance ceiling established by the officials. In effective terms, the amount placed was equivalent to $ 218,783 million.

The Finance Secretariat, headed by Rafael Brigo and Ramiro Tosi, had put seven titles on the table: a 25-day Treasury Liquidity Bill (Lelite), exclusively for mutual funds; two fixed rate bills (Ledes) to February and March; two inflation-indexed bonds (Boncer) as of September 2022 (T2X2) and March 2023 (TX23); and two bonds tied to the evolution of the official exchange rate (dollar linked) as of November 2022 (T2V2) and April 2023 (TV23).

The LEDs were the ones that attracted the most flow. In the market they speculated with the possibility that some public organisms have participated in this segment. In February Finance Lede captured $ 33,989 million at a nominal annual rate of 42.08% and the new Lede in March obtained $ 65,120 million at 42.79%.

In second place were the dollar linked bonds. The T2V2 received offers for US $ 563 million but officials awarded up to the ceiling that had been previously set: US $ 310 million. This meant the income of $ 32,420 million. In TV23 there were offers for US $ 234 million and US $ 178 million were awarded, that is, an effective amount of $ 18,121 million.

This type of instrument has starred in a bullish rally in recent weeks due to the great demand for market coverage from investors who are betting on a post-election devaluation jump or an acceleration in the rate of depreciation. This is a scenario that the Government discards since it considers having the necessary firepower to avoid disruptions in the official exchange market. Dollar linked bonds are agreed in pesos but their value is adjusted according to the evolution of the wholesale exchange rate. By issuing them well into 2023, Economía reinforces its signals that it will not devalue. Such is the search for coverage that these securities are trading at negative returns in the secondary market and Finance was also able to validate negative rates: -4.17% for Q2V2 and -1.02% for TV23.

Economy sources explained that the reason why they did not award more dollar linked despite the great demand was that they seek to save margin in both titles to offer them again during November in a new early exchange of the T2V1 bond (as advanced by Ámbito), a bond dollar linked that expires on the 30th of next month and that represents the most demanding commitment of the last two months. Likewise, in a previous conversion carried out at the beginning of October, Finanzas already cleared 45% of the original amount in circulation of that title.

On the other hand, the shorter Boncer (the T2X2) also attracted many funds in a market that aims to hedge against inflation: this bond allowed to capture $ 47,274 million at a real rate of 2.53%. The longest (TX23), on the other hand, only contributed $ 8,405 million at 3.51% in real terms.

Finally, the Lelites significantly improved their performance. These very short-term bills exclusive to FCI, which debuted two weeks ago in Treasury placements with low demand, this time almost quadrupled their awarded volume. They captured $ 13,455 million at a nominal annual rate set at 34.25%, half a point higher than in the previous tender.

Second round

Today, the second round of the tender will be held within the framework of the Market Makers program, in which only the two LEDs will be available at the same cut-off rates as yesterday. In this instance, the 13 banks and Stock Exchange companies (Alyc) that act as aspiring market makers are entitled to participate, who may subscribe up to an additional 20% of the amount awarded in the first round in each of these bills. That is, if all the available margin were placed, Finance could increase the monthly net funding by about $ 20,000 million.