Caputo’s move could change the fate of the dollar

The government decided to try its luck again on the capital market with a new issue in dollars and put the dollar at the center of the debate. The announcement of a bullet bond due 2029 under Argentine law and a coupon of 6.5% per annum came against a backdrop of very weakened net reserves and a maturity schedule that becomes particularly tight in January. The official bet is clear: get hard currency funding to get through the start of the year with as little use of central bank reserves as possible.

Movement does not take place in a vacuum. comes afterwards a number of successful internships from companies and state governmentswhich had shown that the market was still willing to lend at certain interest rates. Now it is the Ministry of Finance that is using an instrument presented to check how far this interest extends more attractive than the bonds restructured under previous managementbut in a more demanding global and local scenario.

The novelty also comes after previous rally in government bondsdriven by announcements of international financial support, the impact of which is now behind us. This time the reaction was from hard currency securities positive, but moderate: a slight increase that signals approval of the movement, but without repeating the euphoria of other recent episodes. The market appears to appreciate the financial order but remains cautious. About this tension between Financing needs, reserve fragility and exchange rate sensitivity The big question arises: Will the return to the market be enough to ease the financial situation without reigniting fears of a renewed rise in the dollar?

The return to the market and the challenge of getting through January without emptying reserves

From the stock company Adcap they pointed that out The stated aim of the issue is to cover only part of the strong January dollar maturity. As explained, the Minister of Economic Affairs himself assumed that the placement would serve to partially meet this obligation while covering the rest Repo bank lines and with other sources not yet described in detail. The broker’s reading is that the strategy is aimed at this distribute the burdens without being completely dependent on a single financing channel.

Federico for his part Machado, Economist from OPEN (Policy Observatory for the National Economy), focused on the Amount of capital commitment what’s coming: around $2.7 billion. For the economist, the priority is the Ministry of Finance Roll as much of this sequence as possiblethereby reducing the outflow of foreign currency during times of extreme exchange rate tensions. According to his analysis, a “satisfactory” result would be covered at least half of the capital with the new bond and distribute the rest to the existing repo.

The specialist emphasized this from his personal account on the social network X (formerly Twitter). Bringing financing to the market already represents progressbecause this prevents the central bank from having to provide more net reserves for this payment. He recalled that net reserves were at a low level Negativearound the –$400 millionand much further when compared to the targets agreed with the IMF. Every dollar that comes in through debt is a dollar does not leave the BCRA.

For Adcapthe combination between Issuance and repo defines the core of the short-term strategy. Its analysts pointed out that the challenge is not just getting a ranking, but also Make it a reasonable pricewhich does not result in the future debt profile becoming excessively expensive. The balance between How much does the market cover? And how much is financed elsewhere It will be crucial to get through January without a new peak in financial and currency tensions.

Coupon, price and yield: Why 6.5% doesn’t tell the whole truth

One of the technical keys to the operation is the tariff. Out of Adcap They explained that the new bonus for 2029 comes with a 6.5% annual couponwhat it does more attractive than restructured securities during the direction of Martín Guzmán. This difference makes it a competitive alternative within the Dollar curve according to local lawespecially for investors who were excluded from the primary market.

Machado He specified that the coupon does not reflect the final real return. He noted that the tender is defined by price and what investors can offer below the nominal value. He illustrated this using the example of an offer $950 per $1,000which implies performance close to 9.5%much higher than the coupon.

The economist explained this The Treasury will set a limit price. Anyone who bids above this threshold takes part in the award; Those at the bottom are left out. The lower the cut-off pricethe higher the return for the investor and the higher the costs for the state. This variable, he said, will mark the balance between market access and financial costs that the government is willing to validate.

At the same time, experts from Adcap pointed out that the reaction was from hard currency bonds positive but limited. The slight rebound following the announcement confirms that the market supports the return to funding, albeit a far cry from the jump seen in September and October following announcements of external support. In summary, The bond’s final interest rate and willingness to bid will be crucial for any further movement in prices and expectations regarding the dollar.

Local laws, perceived risk and willingness to invest

Machado highlighted a structural point of the operation: the government decided Problem according to local legislationwhich implies higher costs in relation to this under international law. A comparable bond under Argentine law such as AL29 achieves a return of almost 10%while his international couple lies nearby 8.5%. This gap reflects the greater risk that investors attribute to the local legal framework.

At the same time, the economist emphasized that local law has an advantage essentially operational: allows progress without going through Congress, which Acceleration of times and facilitates response before the January deadline. For him, this bureaucratic aspect could have been decisive for the implementation of this strategy.

Out of AdcapIn the meantime, they reminded that the current rankings of companies and provinces Under local law, they showed that at certain interest rates the market is willing to take on the Argentine risk if the compensation is adequate. This experience helps to understand why the Treasury chose this path to retest the depth of the market.

Machado added that if there is interest in a dollar bond under local law, it is reasonable to assume that interest in future issuances under international law that entails could be even greater lower perceived risk. This tender will be carried out as follows Argentine risk appetite thermometer and, by drag, as an indicator of medium-term expectations for the dollar and country risk.

Issue size, repo and the thermometer for the coming dollar

One of the points where Adcap This is highlighted final output size. From the brokerage firm, they said that there is strong speculation about how much the government will decide to place and that in their vision it is likely that it will prefer this a wide broadcast and not one that is too narrow in terms of performance. The reason: the Repo may not be as economicalTherefore, it is not advisable to rely solely on this route.

MachadoFor his part, he insisted on a “good” result cover at least half of the January capital with the new bond, the rest is left to the repo. If the market offered more financing at reasonable conditions, it would be all the better. But he warned that everything depends on it Reduce price and the implied rate of return that the Treasury ultimately accepts.

The broker’s specialists emphasized the magnitude of the problem not only defines the pressure on the repobut also the signal that is sent to the market. A large and sought-after tender would reinforce the idea that Argentina can once again finance itself in dollars. However, it could be a small placement or tariffs that are too high nourish the feeling of fragility.

In this context, both Machado and Adcap agree The return to the capital market will be one of the big tests of the financial summer. The exchange rate climate in the coming weeks will largely depend on the validated exchange rate, the size of the placement and actual demand. The 2029 bond thus becomes an important compass for predicting the dollar’s next direction.