why they expect more pressure after the trading plan Letes

Pressure on the dollar, high bond volatility and direct impact on mutual fund balances. These are some of the reactions that traders and economists expect to see in the market following the announcement by Finance Minister Hernán Lacunza to advance the payment of short-term debt. In addition, they foresee a central bank much more aggressive to defend the dollar and endowed with a greater power of strike to intervene on the foreign exchange market.

In the city, they agree that this rebalancing of debt dispels some degree of uncertainty about the ability to pay in the short term, but exposes the low interest of investors in continuing to fund the government..

The latter was unearthed when Lacunza was forced to declare on Wednesday Letes' call for tenders, which was the prelude to this announcement with which he seeks to extend the term of his deadlines.

"The letter renewal test was crucial, and in the absence of funding, the government had two ways: either to re-use the debt or to split the exchange rate, which would have led to hyperinflation. I think the best option has been taken, "says Norberto Sosa, director of Investing in the Stock Exchange.

On the other hand, Gustavo Neffa, partner and director of Research for Traders, believes that the measure "will fall badly on the market", with further pressure on the dollar and bonds in red at the opening of operations. "It was actually thought that there might be an exchange, but some thought that Letes would continue to be paid with IMF money," Neffa says..

The experienced trader explains that "we are going to enter a phase where everyone is going to be with pencil and paper trying to get the net present value of all the short instruments, which were supposed to be in security and who have not been so far ". Obviously, he adds, it reveals that "the problems were very well founded".

Dollar and shares in the pre-market

The first market reaction took place last night, minutes after the announcements, Banco Galicia's ADR finding a 6% drop after market operations. In parallel, and responding more to an estimate of the banks than real market operations, on the online platforms of banks and fintechs last night, the dollar was sold between 1 and 1.5 USD more than the closing value.

"The government will continue to sell dollars to appease the mood, but the urgency is the box, which is day-to-day," Neffa said..

In the same vein, Santiago López Alfaro, partner and director of Delphos Investment, believes that "there will be pressure on the currency, but that there will be more". weapons to operate ". Sometimes, when close deadlines are eliminated, "the plant will have more money to fight against the exchange rate," he adds.

After the Lacunza conference, the Central Bank issued a statement highlighting the Treasury's rapid response "against the political uncertainty that has prevented the normal renewal of public debt in the short term".

In this statement, Guido Sandleris, President of the BCRA, says that the decisions taken "privilege the use of international reserves to preserve monetary and financial stability, even if it means delaying the payment of public debt to major investors. ".

In addition, he believes that the announcement of Lacunza "should ease the pressure on the foreign exchange market, reducing the potential demand for foreign exchange and ensuring the availability of resources to limit volatility."

However, Leonardo Svrisky, from Bull Markert Brokers' trading table, provides a "complicated picture" of the market.

"This situation is not fixed in two days, nor in a month. The next government will have to fix the problem no matter who. In the background, I see it very very difficult"explains the trader.

The power station, with more backs

Amilcar Collante, economist in Cesur, warns that "there could be another jolt because there is a lot of uncertainty". The economist calls on the image of the short sheet to explain the issue that Hacienda was facing: "Or he had dollars to finance that or to control it."

However, Colante believes that when reissuing short-term debt maturities and sending the bill to Congress, the power plant will have "more firepower to contain the dollar in the short term" .

For Fabio Rodríguez, director of the consulting firm M & R Asociados, this is an important measure that aims to reduce the liquidity situation as quickly as possible.

"This responds to a clear and pressing imbalance that is causing more and more instability, and the government is overreacting to expectations, looking for two mechanisms: on the one hand the most restrictive short-term reperfilation and the other medium-term voluntary and agreements with the opposition and Congress, unpack the short and medium term maturities in local and foreign currencies, "he explains.

The former director of Province Bank pointed out that the reperfilamiento was also an important bet to be able to obtain the IMF's endorsement for the disbursement remaining to be made in September. "In this way, it will combine a larger exchange rate offer to materialize in the foreign exchange market without further flashes, without a new spiral of prices by December 10," he said..

Gabriel Caamaño, Ledesma consultant, believes that in the short term, where the uncertainty had greatly increased, the government sought to unpack the financial program 2019, to the impact on international reserves and to a clear uncertainty, by setting the payment dates according to the type of creditor. private. "

The economist says it was not optimal, "but the market has already been discounted the worst things." In long-term debt, he adds, "he pbaded the ball in Congress". "The key now is what the IMF says," he said.

Rating agencies and selective default

Once the first reaction of the market has been launched, in the city, they wait for the fine print to give more details on the measures announced by Lacunza. On the one hand, as Norberto Sosa explains, what risk rating agencies consider to be essential is that, on the one hand, the government would enter a "selective default", offering conditions different depending on the type of investor and unilaterally a few cases.

Another problem that also deserves a small footprint is what will happen to mutual funds, which were already hit Monday after the STEP, when many had a negative balance after selling Letes at the auction price to make facing the rescue plans.. And if an individual wants to save his share of an FCI that has Letes? Does he have the same treatment as the natural person who holds Lete (charge tout) or is he considered an institutional investor (the debt is repaid at 6 months)?

In this case, it is likely that the National Securities Commission – whose president, Marcos Ayerra, was yesterday on the finance micro-committee listening to the announcements – must issue a statement or resolution specifying how the CFI will respond to plans safety.

"The measure is causing considerable damage to the FCI, which brings together many individual investors, and these are complicated because they risk having a debt," warns Neffa.

Amilcar Collante also points out "the problem of extending the duration of mutual funds, which had already lost a lot of money and we must see what their wallet will look like".

López Alfaro, of Delphos Investment, considers it positive that a restructuring has been sincere, a situation that the market has discounted. "The debt has just been restructured by decree while the bonds were worth $ 40 and some people said they did not have to restructure," he says.

The economist is also eager to send back to Congress the debate on long-term debt restructuring, which calls on the opposition to show its fundamental views on this issue.

Although he thinks there might be some pressure on local badets, López Alfaro believes that dollar bonds quoted at a parity of 30 to 35% would be very close to touching its bottom. "The bond market should have found an apartment here, although that does not mean we have months of volatility," he warns.

The government has already played its card, perhaps one of the strongest of recent months. In a few hours, investors will deliver their verdict in a context of increasing risk and loss of credibility, but attractive returns on certain badets. The power station, on the other hand, must take advantage of its greater firepower to mark the ground in an increasingly small market.

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