economista.com.ar
The government accelerated the music the market wanted to hear. The announcement of the update of the bands and, in particular, the accumulation of reserves came in response to a specific request from investors to buy Argentine bonds.
Luis Caputo, in his meetings with the main banks (referred to in financial jargon as the “sell side”) and funds (referred to as the “buy side”), always had the same complaints: unless there is a plan to recover reserves, there will be no dollars for Argentina.
For this reason, the minister had to enter the local market with a smaller placement when the rumor had spread that the return to the international market was imminent. What was missing to convince potential buyers of Argentine bonds was the reserve film.
The question is how much the central bank will actually buy. Juan Manuel Pazos of One618 (the combination of TPCG and Consultatio) says that purchases on the exchange market cannot reach the target of $10,000 million. “The government promised, with a lot of asterisks, to buy 5% of the mulc volume. If it had no asterisks, 5% would be more or less $4 billion a year. Less than half of the $10 billion they had promised,” he said.
The other part can come from the famous bulk purchases. “If you limit yourself to 5% of the volume, it will be very little. You will be very far away. But you are already going in the right direction. I mean, we had to go to Mar del Plata, we wanted to go to Rosario, now we took the roundabout and go back to Mar del Plata. We are doing better, we will see when we get there,” Pazos said.
“The market called for a more decisive reserve accumulation policy and came to the simple announcement that bond yields should fall by a new notch and reach a Milei-era minimum. The government has not made a drastic change in exchange rate policy, as the average investor might have wanted (that would have been to eliminate the remnants of stocks and bands and move to a dirty float), but the changes are significant,” emphasizes the consulting firm 1816, one of the favorites of the city. Buenos Aires
The signature of two former Banco Mariva warns that there are two questions before us: one is more operational and must see how the changes are implemented.
“The wording of the statement was sufficiently ambiguous in several aspects, since Santiago Bausili clarified that the daily reserve purchase amount, targeted at 5% of the volume operated in the MULC, is nothing more than a reference to manage expectations.”
“It is not clear how the government measures the volume operated in the MULC, and since the tariff policy explanation leaves room for interpretation, the economic team can continue to use whatever discretion it is comfortable with.”
“The average investor and the IMF would probably prefer less currency regulation, less discretion in monetary policy and less official intervention in various markets.”
“But the truth is that this combination has caused country risk to fall from 2,500 points before the Milei-Massa vote to below 600 points now (and it is a counterfactual of what would have happened if monetary/exchange policy had been more conventional).”
The second question for 1816 is more structural: Will the new system enable the purchase of reserves on a significant scale? He says the initial market reaction was excellent for bonds, but CCL is trading around $1,550. Read, above the band cap ($1,520).
Remonetization
“There is no doubt that there is a huge scope for remonetization of the economy (the remonetization of $ 10,000 million in 2026 that the government proposes as a base case is reasonable). The doubt is whether the private parties will sell enough dollars under the cap for this remonetization to be done via BCRA purchases in the MULC (if they bought all the wheels would be 5% of the 200 million US dollars operated, US dollars).
“For there to be more volume, there would have to be fewer foreign exchange restrictions or they could make bulk purchases. Time will tell, but for us the announcements are very positive for creditors. Delivery, of course, remains to be seen,” warns 1816.
The government’s move meets one of the demands that large investors have placed on them, especially those that Caputo wants to seduce who have mutated.
Those who can buy Argentine bonds are no longer those who bought at the beginning, i.e. the distressed funds.
Buy these when the debt is worth 25 or 30% of its value. Since the titles are already worth 75%, they no longer accumulate since it is not a business.
The “high-yield” funds, which buy in the middle, between standard prices and slightly higher prices, were already there. They also will not make further bond purchases if country risk continues to decline due to rising bond prices.
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