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Debt-dollar: a more important agreement for what it avoids than for what it generates

2020-08-04T02:34:24.332Z


Will the pressure on the dollar ease? Should we expect another jump in stock and bond prices? Will the cost of credit go down for companies? Some questions in the heat of the closing of the negotiation with the bondholders.


Daniel Fernández Canedo

08/03/2020 - 21:46

  • Clarín.com
  • Economy
  • Economy

What happens to the dollar after the debt swap agreement? The million dollar question has several possible answers all wrapped up in the expectation of some decompression.

On the first business day of August, as it has been happening increasingly for the past few months, retailers launched into home-banking purchases of $ 200 at the dollar price - saving on the understanding that even at $ 99.45 it is attractive as a defense of value. .

At times, the systems of some banks collapsed and the buyers had to insist until they reached the desired dollars. Was it the retailers or the "virtual collectors" that buy on behalf of others?

The Central Bank will probably have the answer in the next few days but a relief was felt in the wholesale circuit where the "cash settlement" (arising from buying dollar-denominated bonds in pesos and selling them to obtain the foreign exchange) had soared to above $ 126 to then finish at $ 122.

In the heat of the advance of the agreement with the bondholders to exchange US $ 65,000 million, the shares and bonds rose and the pressure on the exchange market was diluted. Is a virtuous circle starting for the financial market?

An experienced banker synthesizes the consequences of the debt agreement in this way: "it is worth more for what it avoids than for what it generates" and taking into account the political and economic uncertainty, it may not be enough.

And without default the economy has serious limitations to overcome the recession, with default this possibility would be diluted even more. Will Argentina go back to get credit abroad?

Minister Martín Guzmán said that the government does not plan to return quickly to the markets but a drop in the country's risk rate could open the way for the private sector a little, which would be a step forward.

In the financial imagination of the optimists, Argentine bonds could yield 10% per annum upon exiting the swap, a very high return in a world of "free money" for developed countries and that can be demanded by investment funds that are fishing for high incomes for their clients.

Within that bubble, and assuming that the agreement does not exclude bondholders who are going to litigate the New York courts, experts draw a virtuous curve in which bonds that today yield US $ 44 on average could rise above US $ 54 and that would lower the country risk rate from 2,200 points to around 1,000 points.

It is this drop in the country risk rate that optimists draw that could lead to less pressure on a stressed foreign exchange market like the current one.

One answer to the initial question about the dollar is that the Central Bank hopes that the debt agreement will decompress demand so that it can continue with its policy of slowly raising the currency (crawling peg) that does not fuel inflation.

The fear of the businessmen is to a foreign exchange leap in the government's search to increase exports, but from the Casa Rosada they highlight it under the argument that it would only serve to boost the prices of the family basket upon leaving the quarantine.

So there is a stocks and a wide exchange gap for a while? The debt agreement may serve to avoid a deepening of these two realities, although it could reduce the 68% distance between the wholesale dollar of $ 72.52 and the "cash with liqui" of $ 122.

And the "blue" dollar? At $ 136 it is clear that he plays another game characterized by informality and with a price of dread supported by the idea that fear is not stupid.

Perhaps, if the agreement with the bondholders results in a solid plan that allows an understanding with the IMF to refinance the maturities of 2022 and 2023, mistrust may subside. For now, it is a relief to be able to avoid falling, again, into total default.


Source: clarin

All business articles on 2020-08-04

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