Stock Photo – Pedestrians walk in front of the facade of the central bank of Argentina (BCRA), in Buenos Aires. Dec 7, 2021. REUTERS/Agustin Marcarian
The State itself is the main holder of public securities issued in local currency. Gradually, both ANSES and the Central Bank were acquiring this debt, given the decision of private investors to reduce their exposure in local currency, especially when it comes to medium and long-term instruments. According to estimates by analysts and banks, the stock of bonds in pesos held by the public sector would already be in the order of 70% and everything indicates that it will continue to increase in the coming months, coinciding with the electoral process.
The debt swap that took place yesterday, which included bonds in pesos maturing until September of this year, presented a similar situation. According to an estimate by the stock market company Balanz, 66.8% of all eligible titles were already in the hands of the public sector, so only the remaining 33.2% corresponded to the private sector.
This important weight of the public sector ensured an important participation in the exchange for new debt at the end of 2024 and 2025, allowing an already very high start-up floor in the operation. The acceptance reached of 78% suggests that all the holdings of the public sector and a smaller portion of what was in the hands of the private sector finally entered the exchange.
The holding of bonds in local currency mainly in the hands of ANSES and BCRA allows us to infer that it is practically impossible to repeat the post-PASO 2019 scenario. At that time, the strong pessimism unleashed by the resounding victory of Alberto Fernández by 14 points caused a strong process of dollarization and forced the government of Mauricio Macri to reshape the debt in pesos.
At that time, August 2019, there was no exchange rate and most of the titles in pesos were in the hands of companies, banks and mutual funds. Now, the situation is more manageable due to the exchange rate and also the strong weight of the holdings of the State itself of the debt in local currency.
The other side of this process of virtual nationalization of the debt in pesos is a gigantic monetary issue that has been taking place since last year and continues so far in 2023. It is estimated that this year the issue to repurchase titles in pesos in the hands of of investors comfortably exceeds one million pesos. In fact, it is the main source of monetary expansion, without counting the interests of the Leliq and passes that the Treasury must carry out.
The purchase of bonds in pesos by the Central and ANSES, via FGS, gradually reduced the holding of these assets in the hands of the private sector. The consequence is a greater monetary issue, although at the same time the danger of a reprofiling like the one that occurred in 2019 is substantially reduced.
Therefore, it is reasonable to infer that the inflationary acceleration in recent months is partly explained by this transfer of bonds from the private to the public sector. This is due to the fact that the bond sales carried out by the companies are automatically acquired by the Government, with the objective of avoiding that the parities fall and the interest rates increase suddenly. “The BCRA has fulfilled the role of buyer of last resort, granting liquidity to financial entities (banks and insurers) and to the FGS of ANSES to participate in the tenders,” the work adds.
Balanz emphasized that the new titles offered by the Treasury in this new debt swap in local currency “are not attractive to the private sector.” The main bond offered was a Boncer (inflation-adjusted security) that matures in December 2024. It is a paper considered too long and volatile for companies or banks, but attractive as a holding for state entities.
It is reasonable to expect that with the increase in uncertainty typical of electoral periods in Argentina, this trend will deepen, forcing the Central to go out and sustain the bond parities via greater expansion of pesos. This movement is outside the goals agreed with the IMF, which only establishes limits for temporary advances from the BCRA in favor of the Treasury.
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