Despite currency restrictions, a foreign fund was able to withdraw $ 600 million from the country this year

Franklin Templeton, one of the big Wall Street funds that was heavily positioned in peso assets under Mauricio Macri’s government and didn’t have a chance to get rid of those failed investments due to the establishment exchange controls in September 2019. a way to gradually get your jobs out of the country. To achieve this, he took advantage of the official strategy to tame the free dollar and the rest of the currency’s parallel quotes, which is to sell the central bank reserves in the bond market. The calculation estimates around $ 628 million what the financial giant was able to withdraw from the country.

“Templeton sold 25% of its peso position in the first quarter of 2021, according to our own survey of all funds the manager has in the US and Europe. In total, these are sales of $ 628 million in cash with liquidation. Considering the fact that there were 59 business days in the first quarter, that means Templeton sold bonds in pesos and demanded cash settlement for just over $ 10 million per wheel, ”said a report from the consulting firm 1816.

“At the end of March, Templeton still had nominal peso securities totaling $ 1,894 million, taking current prices. Maintains significant positions on Treasury bills adjusted to 1.20% in CER due 2022 (TX22), Treasury bills adjusted to 1.40% in CER due in 2023 (TX23), Treasury bills adjusted to 1.5% at maturity rate) ”, details the private report.

“Templeton sold both CER Bonds and Botes very strongly in the first quarter, which partly explains the poor performance of the securities in March,” 1816 added.

The Templeton fund is one of the biggest bettors on local currency bonds during the last administration. After the introduction of exchange controls, this fund and PIMCO explained about 90% of the bond holdings in pesos that are in the hands of non-resident investors.

These are investors who want to lower the blinds after taking heavy losses from the soaring dollar in 2018, 2019 and 2020, but who are unable to do so immediately given the current exchange rate barriers.

The Templeton and PIMCO movements have been a headache for the Minister of Finance, Martin guzman, during the exchange rate turmoil that last year brought the free dollar down to nearly $ 200. As the Minister explained at the time, given the huge holdings of peso bonds in these funds and the small size of the local dollar market with settlement, the constant sales of local currency securities and subsequent injection of the resulting pesos in the market. Dollar bonds are said to have helped spike the financial prices of the currency.

“Templeton sold peso bonds and demanded cash settlement for just over $ 10 million per wheel” (1816)

Thus, on two occasions in the past year, Guzmán has offered to swap peso debt for dollar debt, with the aim of “giving way” to these giant investors and reducing the pressure on the spread. exchange rate.

After these two formal exchange operations, the disarmament of Templeton’s positions continued. Now, instead of resorting to officially scheduled operations, the finance company is taking advantage of the sales of reserves that the Central Bank makes on the dollar market with settlement and which pursue the same objective to prevent the exchange differential from widening.

The strategy led by the entity led by Miguel Pesce It consists of taking advantage of the currencies that exporters liquidate on the formal foreign exchange market to resell them on the financial dollar market. It does this by buying bonds with dollars and selling them in exchange for pesos. In fact, it ends up being a currency selling transaction.

So far this year, the Central Bank has bought $ 3.15 billion on the foreign exchange market – with official data as of April 16 -, thanks to the rise in the international soybean price and the onset of the season. crops. According to estimates dating back to 1816, until March, the entity used between $ 438 million and $ 661 million of these currencies to secure a supply of dollar cash with settlement and thus keep the price pressed.

The BCRA’s dollar sales figures using settled cash are not public and entity spokespersons have chosen not to disclose them. However, based on official data that the entity publishes – such as the change in monetary base, since sales of foreign currencies remove pesos from circulation – or the change in international reserves – currency movements outside the formal foreign exchange market to those who are subtracted from the variation in the price of gold and the yuan which are part of the reserves – can arrive at rough estimates.

“The BCRA’s operations are carried out exclusively on the markets regulated by the CNV. The BCRA is neither the only nor the most important actor since the securities markets have channeled important transactions from the private sector, both companies and individuals who weigh or dollarize their assets. In these markets, General Resolution No. 878 of the NVC set limits on the demand for dollars from the rest of the agents, limiting the purchase to 100,000 nominal values ​​per week at most (or approximately US $ 36,000) “, spokespersons for the monetary authority told Infobae,

“Outside the market in which the BCRA operates, there are OTC (Over the Counter) operations. These operations are possible because there is no restriction on the entry into the formal market of securities acquired during transactions between individuals, ”added the spokespersons of the Centrale.

“With so many sales of peso bonds, their prices fall and the rate of return increases, making local currency debt issuance less attractive” (Przybylski)

For its part, Franklin Templeton’s corporate communications department declined to comment.

The constant departure of a big player like Templeton from local currency investments is a complication for the government’s financial plan, because by downloading peso bonds day after day, it lowers the prices of these assets and hinders the debt investments that Guzmán must finance. the deficit and not forcing a bigger monetary issue through the central.

“The risk for me is to see if the market can assimilate these sales or if peso bonds suffer a lot,” he said. Martin Przybylski of Consultatio. “With so many sales of bonds, their prices fall and the rate of return increases, which makes debt issuance in pesos less attractive,” said the analyst.

At the end of March, the Ministry of the Economy had problems rolling over part of the local currency debt maturities by placing new debt securities. The result was that he had to ask the Central Bank to issue $ 65 billion to cover the payments. Yesterday in a new tender, the Treasury changed its strategy and managed to place nearly $ 124 billion in debt, which is necessary to avoid having to ask for more issues without the backing of the monetary authority, a factor that is at the root of today’s price dynamics.

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