The Minister Luis Caputoonce again, surprised the market. All private analysts assumed that the long-awaited return to the dollar debt market after an absence of almost eight years would come a little later.when country risk was significantly reduced to issue bonds in New York with the aim of refinancing foreign currency obligations without sacrificing reserves, as most countries do.
Although it is a problem for a small amount, in the short term and within the limits of local legislationThe signal is positive: it is seen as an impetus to further reduce the country risk and thus pave the way for securities placements under foreign law with larger maturities and amounts in order to refinance not just a small part (as before), but all or a large part of the maturities.
What’s behind it? Everything seems to indicate that Caputo is trying to “test” the market through an operation that could provide clear evidence that investors are interested in Argentine debt denominated in foreign currency. From the result, pstart larger foreign missions. Additionally, accelerate country risk reduction to be able to advance the latter.
You’ll get the answer in the middle of next week when the call ends, which apparently aims to capture a little more 1,000 million US dollarstaking into account that the amount, as indicated, will be used to pay part of the capital maturities of Bonares 2029 and 2030 in January. For now, expectations are positive and operators’ eyes will be on the price of the new bond Internal rate of return (IRR) with which it will come onto the market.
Luis Caputo’s strategy with the new bonus
According to the consulting firm Outlier, Caputo is trying through this operation “Test the water temperature”. One of the details that supports this assumption is that the official declaration did not specify a precise maximum amount for the expenditure. This would indicate a “Minimum level of prior engagement that subsequently allows sending a good signal” to the market.
“For the duration, this is the return that this stock could have at the close of trading on Thursday 10.62%which results in a bid price of $87.7. However, we believe the government will likely try to borrow at a single-digit interest rate, so we would expect a price of around $90. “Therefore, we are convinced that a minimum demand needs to be set at this tariff level and we will definitely examine whether it is possible to add something more,” he adds.
In dialogue with iProfessionalAnalyst Gastón Lentini agrees that Caputo will have this problem “a test of whether the market is willing to buy new Argentine bonds in dollars”about the conditions, such as B. the term to be recorded and the amount to be recorded. He reiterates that demand and interest rates reflect investor confidence in the current government and, if positive, will be able to make larger placements later to clear a large portion of the debt.
“If all goes well, the government could issue new bonds with longer maturities, thus avoiding maturities until 2030, thereby significantly reducing sovereign risk. The underlying logic is that Argentina can meet all of these obligations from 2030, when the field is exporting record volumes and mining may have started exporting larger volumes, between lithium and some copper, and of course Vaca Muerta is exporting in all its glory.”he claims.
The investors Caputo is targeting
“Investors who were stuck with dollars after capital controls were tightened before the election may see this instrument as an exit door or a new arbitrage opportunity (24/7). 2.7%given the current exchange rate gap). Another hypothesis is that this could be a necessary matter to obtain securities that would later be used in a possible “repo” transaction against international private banks,” says PPI.
The consulting firm 1816 assumes that this problem will be solved with a IRR less than 9% to “mark the field” for future international placement, while the Globals are currently just off the mark 10% in New York. Therefore, He believes that with this issue Caputo wants to attract the interest of local rather than foreign investors.
“If, in our view, Caputo is targeting an issuance at a rate below 9%, the question becomes what type of investor might be tempted by the brand new bond with a very liquid AL30 yield.” 10.6% against MEP. The big local investors are the banks, which currently have enormous dollar liquidity due to the growing stock of private deposits. “For some reason the banks have not invested this liquidity in Bonares, so we see no reason for them to demand the brand new bond unless there are additional incentives, such as regulatory changes,” he points out.
Outlier analysts suspect the new debt instrument, which is governed by local laws, could deter demand from foreign investors who might be more attracted if it were an instrument issued under U.S. law.
“However, in order to organize the auction, the approvals would probably have delayed the process and the priority is certainly to send a strong signal in a context where the grumblings about net reserves and the impending payments have begun to reactivate. Showing the ability to rollover, at least partially and moreover at Bonares, contributes to the relaxation on this side and allows things to move along while waiting for the process of reforms in Congress to also do its part.”he adds.
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