The Central Bank of the Argentine Republic from December 7, 2023 to date showed a increase in reserves of 41.6%, it must be taken into account that At the end of the month it will make a payment to the IMF that will once again place it below the psychological barrier of US$30 billion.
During May, the arrival of the soybean and corn harvest should strongly push the reserves up, crop harvesting problems linked to the weather and logistics have delayed the arrival of merchandise at the port, rOnly at the end of May will we know if the farmer is willing to retain merchandise or sell. Planting should begin shortly. wheatwhere the numbers have begun to close, however, The area to be planted could fall by 5%, according to data from the Rosario Stock Exchange.
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As for the liability of the Central Bank, monetary circulation grew 30.5%, while inflation measured in the same period could be around 100% (we do not have April inflation yet), the wholesale dollar in the same period increased 139.6%. In real terms the amount of currency fell sharply, and if we measure it in dollars much more.
The monetary circulation measured in dollars as of December 7 was US$18,001 million, currently it is US$9,805 million. The smaller number of bills helped the fall of alternative dollars. The MEP dollar went from $986 to $1,016, which represents an increase of 3.0%. Clearly, whoever bet on the dollar lostand this generates a poverty effect in the population with an estimated stock of dollars close to US$ 200,000 million, of which some US$ 80,000 million coexist in an informal market.
Los reserves rose 34.1%, nor there is a significant increase, which reflects that there was no explosion of growth in bank deposits.
Los liabilities in dollars show a strong rise, first of all, due to the devaluation of the peso, secondly, for the placement of the bonus for Bopreal importers, This provided more reserves to the Central Bank, but also liabilities. It is expected that a new Bopreal bond will be placed for those who want to remit profits and dividends abroad, an estimated US$ 4,000 million. In dollar terms, the Central Bank’s liabilities went from US$5,051 million to US$9,058 million. Bopreales were placed, but debts in Levid were cancelled.
The passets in pesos of the Central Bank rose 54.2% in the period analyzed, cso half that of inflation, and here the blender effect operated, They are adjusted for negative interest rates against inflation. Currently, the monetary policy rate is 60% annually, which implies a monthly rate of 5.0% while inflation almost doubles this interest rate level.
The treasury has issued bonds to entice banks to convert from Central Bank bills to longer-term bondstrying to show an improvement in the capitalization of the Central Bank, reducing your liabilities and increasing reserves.
What about the bonuses and losses of the last week?
This week we have observed in the market a sharp decline in bonds in inflation-adjusted pesos, to give just two examples, the TX26 bond fell 11% and the TX28 13.8% from their highs. The decline in these titles is because the market is pricing in a sharp drop in inflation levels. Both titles show negative rates of return of 1.2% and 3.4% annually, in both cases the expected inflation minus this rate of return would give us an interest rate higher than the fixed-term rate and the rate of devaluation of the peso. , so these bonds remain very attractive despite the decline in recent days.
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The TX28 has risen 116.8% since Javier Milei took office, which compared to a 3.0% rise in the MEP dollar leaves a spectacular gain in dollarsr. Similar is the case of the TX26, which rose 101.5%. There’s no doubt Both securities protected you against inflation and left you with great profits in dollars. Holders of both securities may disregard the decline in recent days.
In parallel On the downside of inflation-adjusted bonds we see that sovereign bonds are at maximum levels. He AL30 closed at 58.17, the previous friday At the inauguration of Javier Milei they were quoted at US$ 37.15 which reflect a rise of 56.6% in dollars.
The data for a good business
He arbitrage of short bonds for longer bonds seeking a greater amount of nominal amounts can be a good exercise to seek to enhance utilities in the future, especially busing differences in written rates when paying rent.
Three conclusions
1) The Central Bank substantially improved its balance sheet, but it still has some way to go. The scarce monetary issue, the more stable dollar and rates like the Baldar that went from 130% to 50% annually show a substantial change in the monetary and exchange scenario. The monetary policy rate that remunerates the Central Bank’s liabilities in pesos fell from 133% to 60% annually.
2) We do not see the possibility that under the current scheme we will have an upward trend in the dollar, it would give the impression that the wholesale dollar will continue to adjust at a rate of 2.2% monthly, the implicit rate of the future dollar is located at 57.5 % annual so we do not expect any surprises on this side. Regarding the dollar bill, the recession would assure us that any increase will be a sales opportunity, economic agents are out of money and will have to resort to their savings in hard currency to balance their accounts.
3) The promise of the national government to honor the debts, the payment of interest and amortization of sovereign bonds in dollars on July 9 will continue to push these securities higher, with a price horizon around US$ 70 in the case of the shorter bonds. Regarding bonds in inflation-adjusted pesos, they continue to be a very good option, despite expectations of lower inflation.
* SDS Business and Business Advisor, Economist.