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17-07-2018
They also believe that tax objectives are irremovable and constitute the backbone for restoring market confidence.
In a new report prepared by badysts Morgan Stanley and with the International Monetary Fund's program focused on tax measures already approved, the investment bank has reviewed the requirements Financing of Argentina in the next 18 months and its positioning recommendations for local fixed income securities
On the economic side badysts of the bank In their report they state that the most important conditionality related to the IMF program is related to the fiscal consolidation which includes the achievement of a primary budget. balanced for 2020.
The objectives of inflation would be second in importance. The remaining conditions represent a lesser degree of Argentina's commitment to the IMF.
"On the basis of the financing program recently announced by the Government for this year and the following year, it seems obvious that Disbursements could be used to finance the deficit, reducing the need to access credit markets, "note Morgan Stanley badysts.
In addition, they argue that" if this is feasible, conform to inflation goals will require a big effort "." On the one hand, "they say," the existence of a restrictive monetary policy is important and to achieve inflationary goals, it also seems necessary to have higher interest rates for longer. "
The report details that they are expecting at a rate of 36% at the end of the year and 27% at the end of 2019, reflecting an increase in the previously projected peso curve of 31% and 24% respectively.
Morgan Stanely's badysts are frank in their projection: "We see a significant disinflation next year, with an overall
annual inflation that drops by 27.9 % in 2018 We also consider that tax objectives are irremovable and constitute the backbone for restoring market confidence: while the authorities are trying to impute adjustment, in 2018, a In fact, we think that "will outgrow" and end the year with a primary budget deficit of 2.5% of GDP ( against the target of 2.7%) "
Possible Policy Change in 2019
The report indicates that valuations of Argentine badets are in line with high-yield loans (although it is not the case). they also add that Argentina delayed the rbade July [194] 59007] and now operates in line with Ukraine, Bahrain and Pakistan, among others.
"That said, although Argentina should exceed the credits mentioned, we believe that the differentials will have difficulties for ] reduce its spread and therefore we remain neutral on the sovereign credit of Argentina ", they evaluate.
On the other hand, from the investment bank, he acknowledges that the market has increased the possibilities for policy change in 2019: "One of the concerns of the market
is that the context of lack of economic growth, combined with the fiscal consolidation encouraged by the IMF, will harm the
] re-election opportunities of the current government in October 2019 ".
Short bonds and not the centenary
Finally, according to El Cronista, concerning the recommendations of Morgan Stanley, the favor of bank remain in the short part of the curve . "Given our cautious view of emerging markets in general, we recommend allocating positioning to bonds between 2021 and 2023. Assuming that exchange rate volatility declines and the risk appetite Domestic investors are recovering, "Finally, the bond of the century is still traded at a lower yield than the 30 bonds, which makes it unattractive to us," he says Morgan Stanley's report
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