Today there may be new “calls” and the sale of Central Bank bonds to artificially control the dollar

On Thursday at four in the afternoon, the seven largest players in the market received a call. They were kindly asked to contribute to economic stability in Friday’s round so that the settlement money and the stock dollar or MEP do not rise. “Don’t carry out your operations, only those requested by your customers. We are about to saturate the offer with our bonds, ”they were told. The caller knew that arbitrage (hedging) transactions by brokers and other traders add up to a significant volume of the market. In this way, by not arbitrating, they could favor bond sales and drive down the price of alternative dollars.

Traders understood the message, which was not threatening or anything like that, but were surprised that, the next day, Friday at nine in the morning, two hours before the stock market opened, he remembered what they had been discussing. the day before .

Obviously, the operators talked to each other and understood it Martín Guzmán, Minister of Economy, had a lot at stake in that wheel because his measure to alleviate obstacles to alternative dollar operations was failing and Alberto Fernández’s pressure was known.

A good understanding

He hadn’t told him openly, but there are gestures that made him realize that presidential support was limited and that he needed to control the dollar as soon as possible. Guzmán told him not to pay attention to the “blue” which is not representative in the economy and to look to alternative dollars where he would focus his efforts to lower it. “If we succeed, the blue will go down and there will be less pressure to devalue,” he said.

To reinforce the message, the Central Bank raised the wholesale dollar by just 5 cents to $ 78.13. But this move cost him the sale of $ 40 million because it was decided to satisfy all the importers’ demand to decompress the alternative market. That’s why the turnover reached $ 244 million, a similar volume to the previous day when it was a strong reserve seller, and $ 100 million more than the previous wheels business when, not selling dollars to importers, has managed to buy and strengthen reserves. On the six reels leading up to the fateful last Thursday, bookings grew by $ 123 million.

The market response was immediate. With the big hands out of operations and the Central Bank offering debt bonds, the stock dollar or MEP fell from $ 7.92 to $ 168.83 with deals worth USD 48 million, a volume showing that the absence of operators was offset by a strong sale of Central Bank bonds. Cash settlement with businesses of $ 72 million lost $ 12.23 to $ 168.83. The “blue,” which was out of control, rose $ 5 to $ 195. Debt securities rose slightly and brought country risk down 17 units to 1,425 basis points.

The bad news was for the reserves, which lost $ 170 million. In the last two days of last week, they dropped from $ 322 million to $ 40.499 million. In addition to having to sell USD 40 million in the wholesale market, deposits with banks continued to grow at around USD 60 million per day. Since these deposits have reserve requirements with the Central Bank, the fall affects the reserves. Deposits are about to cross the $ 15 billion mark. They are at their lowest level since October 20, 2016. The rise of the dollar has also played a role, not only against the major world currencies, but also against gold. This has resulted in a decline in the price of the precious metal, the euro, the pound and the yuan, the main components of reserves.

The stock market closed higher despite the initial disorientation that led the S&P Merval, the index of the main stocks, starting from 2.6% lower and then rebounding and closing up 1.63%. In this way, the stock market maintained a 16-wheel upside.

Abroad, ADRs – Wall Street-listed equity certificates key to liquidity management with liquidation – had a positive spin with only two negligible drops. Cresud (+ 9.66%) was the best followed by IRSA (+ 6.53%) and IRSA Propiedades Comerciales (+ 5.34%).

Key wheel

Today will be a key wheel and it is almost certain that the Central Bank will intervene in the bond market to control alternative dollars because it needs to win 24 hours. Tomorrow it will offer bonds indexed at the official exchange rate (linked to the dollar) plus others that pay a Badlar rate (the average rate that banks pay to those who make fixed terms of more than $ 1 million and which is now at 31.12%. annual) and bonds indexed by cost of living. The outcome of this pesos bid is critical as it faces maturities of nearly $ 128 billion before the end of the month.

Nobody doubts himor what happened on Friday and what can happen today with the intervention of the Central and, perhaps, with new telephone recommendations to the operators, is unsustainable. Devaluation is lurking and the government wants to avoid it. But charging for too long with a distance greater than 100% is impossible. The shortage, already evident in some products, inflation and the collapse of export activity are the first consequences. For this reason, dollar-linked bonds will be the biggest attraction, but we must be careful because if the devaluation is with a split in the exchange rate, they will be affected.

Argentina is also unpredictable for the Minister of Economy, who sees the measures taken to calm the dollar fail one by one. What he has left to do – and he will – is little, other than assuming that the dollar will rise due to deeper causes such as investor distrust, exporter discouragement, and the legal insecurity that the threat to private property poses. Traders and investors fear politics more than economics and this is the real drama of Alberto Fernández and Martín Guzmán.

I continued reading:

What happened in the Argentine economy when the exchange gap exceeded 100%

The government is playing to avoid a mega valuation and the goal is to hold out until the next harvest