Key day. The government must renew its debt for more than 2.8 billion US dollars in an unfavorable context

Today, Minister Hernán Lacunza faces the greatest challenge since his arrival at the Palacio de Hacienda, at the expiration of short-term debt denominated in pesos and dollars for an amount exceeding 2800 million euros. U.S. dollars. In an unfavorable financial context, with low reserves and a country risk of more than 1800 points, the supply that ends tomorrow represents a test for the market, with the risk that a low percentage of renewal of these letters may imply a decrease. reserves more pressure on the exchange rate.

In round figures, the government is facing this week the maturity of $ 1,600 million (Letes) Treasury, plus $ 67,000 million of Lecaps (letters of capitalization) and Lecer (corrected letters of the l inflation), which at the current exchange rate to US $ 1,200 million.

On the Letes side, the eye will be on the percentage of turnover (roll over) of these securities, which are 55% (909 million USD) in the hands of private investors (savers, banks, mutual funds). In the most recent investments by the Treasury, there has been a renewal mainly by the public sector, which should be maintained this week (its terms are $ 693 million).

The case of private investors is different. Many of them have recently given up renewing their letters and have chosen to earn money in recent calls for tenders. If this trend is repeated this week, the Treasury must pay these maturities in hard currency, which will have a negative impact on the reserves of the BCRA, which has lost $ 8 billion since.

The situation of the peso letters is different, which at the end of this week corresponds mainly to Lecaps (59 000 million dollars, or 88% of the total). A low percentage of renewal of these securities could represent an increased pressure on the exchange rate at the end of this week and the next.

"Part of the dollars that the IMF will pay, the Treasury must sell them to earn pesos, because it not only needs this money to meet its debt maturities in dollars, but also to meet some of its expenses in pesos, that through the agreed monetary program, it can not give the issuing machine and that the central bank finances the budget deficit, "said Federico Furiase, chief economist at Eco Go.

Even with signs trying to calm the market, the financial scenario for Argentina is difficult, with the country risk remaining above 1,800 points and the price of government securities remaining low.

In the previous call for tenders, completed the week after the OSPP, the Treasury had to validate a nominal rate of 7% to renew the Letters in dollars in the short term (105 days) and was barely able to place 43 % of the total due on this occasion. .

In turn, he had to cancel the cancellation of letters expiring in March 2020 before investors flee local debt securities due to uncertainties related to the arrival of a new government and the availability of foreign currency to meet these commitments. .

"Under the badumption of a crisis scenario with a turnover of 0% of dollars with the private sector and 50% of letters in pesos, and given the disbursements of the Fund pending in the l 39; year, the Treasury is expected to sell around 4500 USD / 5000 million US dollars in the dollar financial program, which could have a negative impact on BCRA's reserves, "said Furiase.

In the call for bids that ends tomorrow, the Treasury announced that it would place Letes at 35 days (expiring Oct. 4) and at 140 days (expiring Jan. 17, 2020), as well as Lecaps at 35 days (expiring October 4). The operation will be open until 3 pm and the results will be announced in the afternoon. In the secondary market, even with low liquidity and activity levels, October maturities now offer yields of between 30% and 40%.