BCRA would be forced to sell dollars this month

On the internal market, there are still unresolved political problems which, both for the formation of electoral alliances and for the definition of candidates, can tip the balance in a market managed with binary options. For badysts from here and abroad, the alternative is Macri or Cristina, regardless of the place occupied by the former president on the ticket. On / off. On off.

The cards will be completed in the course of the month, the 12th with the alliances, which will mark in opposition the degree of cohesion of Peronism and the chances of defeating the party in power at the primary of the month of April. August, the first round of October and a possible November election In addition, the ruling party must have information to finish gathering the image. And on the 22nd, the mystery of the candidates will be cleared up. Taking financial risks in a context of imperfect information and high volatility is like throwing a coin. It can be expensive or deadly. Win a lot and lose a lot.

From outside, last week marked a change of mood among investors. US President Donald Trump has added a new front of conflict to those who are still unsolved with China over trade issues, the wartime tension with Iran and the imposition of A 5% duty on imports of Mexican products. force the neighboring country to stop illegal migration to the United States

Too many open fronts, for the moment, of uncertain resolution. As could be expected, financial capital has sought refuge in quality badets, as evidenced by the decline in 10-year US Treasury yields, a clear signal of the T10's rise due to the higher demand generated by flight to quality. In May, the rate fell from 2.50% to 2.13% per year.

Added to this is an increase in volatility (VIX index of 27% to nearly 19 points on 7 wheels), losses of up to 1.5% daily on the Wall Street indexes and the ebb of emerging market investments. The EEM fund that tracks the stocks of companies whose countries make up the MSCI EM index lost 6% in May. The MSCI Argentina was saved and almost neutral thanks to the purchases that the recategorization brought about for Emergent. And the picture is complemented by a stronger dollar in the world. The DXY index that compares the US currency to the 6 major currencies (euro, pound, yen, Swiss franc, Canadian dollar and Swedish krona) is high, around 98 points. And it also affects the currencies of emerging countries. The Mexican peso, for example, lost 2.3% on Friday.

Sovereign bonds were punished, which resulted in the leap of the country at risk. After recovering to a level above 1,000 basis points and drilled 900 wells, it rebounded to 984 in less than a month. Government bonds in dollars continue to suffer losses of more than 1% per day, especially on the short end of the curve. The Bonar 20 offers a yield of 18.9% and the Bonar 2024 of 19% a year. High figures that reflect market prevention to what they view as a possible difficulty for the state to meet its financial commitments after 2020. However, long-term bonds, such as the Bonar 2037 or the centennial, have rates of 12.5%. and 10.8%. The difference is the measure of the vulnerability of the closest bonds. The possibility of private debt restructuring is being considered in the market, with different, all optional variants, which include longer terms, lower rates and probably the elimination of capital, which increases with the likelihood a triumph of Fernandez. Or a combination of 3.

Whichever candidate wins the presidency, and despite the commendable statements of several politicians that they will fulfill the obligations, ruling out any possibility of default, technical clarifications as to how resources will be generated to meet in time and form. The double bonus that expires in February yields more than 30% in dollars, revealing the market's concern about a possible change in the exchange rules. Until now, the IMF's central bank's license to intervene to sell international reserves had been used to decouple the dollar from the rest of the badets. Since April 29, the dollar price has fallen 2.8% and allowed those who invest in pesos to make profits of at least 7% per month.

The announcement was enough to generate a pax exchange window. Until now, the BCRA did not need to sell currencies in excess of US $ 60 million a day from the Treasury. The liquidation of grain and oilseed exporters, which contributed $ 2.395 million last month (an average of $ 79 million a day, half of what was forecast), contributed a small . Demand has been pulled back and the dollar financial offer has increased to take advantage of local currency yields from 4.5% in common terms.

Until now, the BCRA did not need to intervene. But political definitions, global tensions and increased risk aversion can be combined to accelerate the dollarization of portfolios. BCRA Exchange Balance figures show that in February, the formation of external badets of the non-financial private sector amounted to $ 965 million. In March, this amount reached $ 1,771 million. And in April, it rose 32.2% to $ 2,341 million. We will have to see if the offer manages to balance the market.