State risks returned to 1500 points and the free dollar exceeded 1400 dollars after government statements

The market reacted bearish to the president’s plan Javier Miley To stabilize the economy “The second phase” At the stock market level, bonds and stocks on Wall Street.

Last Friday, the Minister of Economy. Louis Caputoand the head of the Central Bank, Santiago BoselliHe announced that the economic stabilization program launched by Meli last December is entering its second phase, with a focus on the final cleaning of the BCRA balance sheet, after it managed to restore financial balance in the first phase through a strong adjustment of the “shock.”

on wall street, Shares and deposit transactions of Argentine companies traded in dollars fall by up to 7%Headed by bank notes. Dollar bonds lose more than 1% and Argentine country risk once again exceeded 1,500 points Essentials, maximum since June 11. The alternative dollar was also up about 2%, with record rates across all its rates and an exchange gap of more than 50%.

1) No definition of “traps”. After the approval of the Basic Law and the financial package, it is expected that definitions will be established in this regard. There were only generalized statements, but without accuracy, which increased operators’ doubts in the short term.

2) More Treasury debt. When the accumulated debt is transferred in the form of profitable liabilities from the asset management bank to the treasury, it will be necessary to deepen the fiscal surplus path to meet maturities. Such a deep fiscal adjustment in a period of economic recession and poverty that has exceeded 50% would predict ominous results for the balance sheets of companies, whose earnings are linked to the economic cycle. The prices of dollar bonds also fall, and thus country risks increase, since as the government’s liabilities increase, it is expected to work harder to cover maturities.

3) Why are bank stocks falling? Bank notes are the ones that are most affected. The declines reach 7%, led by the Supervielle Bank. This is because in this new phase it was announced that the central bank will stop issuing money to finance its maturing liabilities and that the central bank will stop issuing money to finance its maturing liabilities. Transferring obligations to the treasury With the new monetary regulation discourse. Given that banks place the funds they take from their clients with fixed terms in TRA-liable obligations, the new strategy of shorting the treasury increases financial entities’ exposure to sovereign debt securities, with lower credit quality than TRA’s letters. This is why the former pays a higher price than the latter.

“On the one hand, there are two fundamental elements, economic fundamentals and expectations. In terms of economic fundamentals, Argentina, in the last four or five days, has achieved very good results, on the one hand, approving the long-awaited basic law, which it was not sure would be issued.” And it will actually be issued, and it is very supportive of the market, and very supportive companies. On the other hand, even though the interest rate was low, the head of the Central Bank and the Minister of Economy came out to say that they are looking for a positive real interest rate.” Christian Gardelfounder of Jardel Trading Company.

Gardell also highlighted the bullish reaction to the alt-dollar, despite Luis Caputo Reject any possibility of devaluation For the official exchange rate: “to mention Drivers And the dynamism of expectations in recent days, Wednesday, Thursday and Friday, in Argentina, the central bank sold $200 million. This is generally unusual at this time of year. It is natural that there is an accumulation, hoarding, or storage of exportable goods by the agricultural sector, and this raises some doubts. Doubts generate uncertainty, and uncertainty prevents the dollar price from falling or rising.

Among the points announced, The central bank will stop issuing money to finance the interest it pays on its liabilities It is the second-largest “tap” issue after that allocated to finance the treasury deficit, which the government considers the main reason for the rise in inflation, which reached 276.4% year-on-year in May and 4.2% monthly.

To this end, obligations owed by the Central Bank will be paid It was replaced by treasury debtBanks will put their excess liquidity, not into negative permits — a type of instrument issued by the BCRA — but into monetary regulation bills, issued by the Treasury Department.

“In return, the Treasury will increase its market debt at a floating rate and pay more interest, which will require a larger primary surplus to maintain fiscal surplus,” the firm noted. Delphos Investment Company In a report.

Former head of the Central Bank Martin Redrado He explained that it is a voluntary exchange of negative BCRA permits held by banks. $15 trillion – equivalent to about $16.4 billion at the official exchange rate– Redrado explained that the important point is that what will be presented to the banks is a “Low quality” debt. – The Treasury, unlike the credit regulator, has a history of default – so, in order for banks to accept it voluntarily, it recommended “creating incentives” so that entities could convert that debt into new credit.

How the government will go about prolonging a strong fiscal adjustment in the context of a continuing economic downturn and rising poverty rates is one of the biggest unknowns, beyond the political motivation it believes it has achieved with the reform plan. Congress recently approved a reform package. The economy proposed by Miley.

After this process The only source of monetary emissions will be the purchase of dollars. By the Central Bank with the aim of rebuilding its troubled cash reserves. And it remains There is still a solution to the millionaire size of the “sell positions” pendinga type of liquidity insurance for debt securities granted by the BCRA, which will require reaching an agreement with banks.

The announcement of the “second phase” came amid growing skepticism among investors, who began to see changes in exchange rate policy as necessary for a convergence towards unifying the numerous existing exchange rates together and opening up so-called “stock exchange rates.”

Mariano Marco Del PonteThe partner at Silver Cloud Advisors explained, “The market expected that they would talk about the exit of stocks They ended up talking about changing from BCRA to Treasury risk where the implementation was not explained well either. I don’t like anything. The government is blindsided by killing inflation and zero emissions regardless of other variables.

However, the government announced on Friday that the long-awaited lifting of exchange controls, one of the main campaign promises that led Meli to her 2023 election victory, would be left to the third phase of the programme, without a specific deadline and subject to compliance with certain “parameters”.

to Essential Life-Saving Condom ConsultantThe government continues to send Confusing signs“On the future of exchange and monetary management, which is an unclear path” depends on vague messages from officials and the president himself, who successively mentioned various alternatives such as dollarization, and competition for the currency – without definitions about what it is -, which are endogenous. Dollarization, deregulation, etc.

The conditions for raising stocks set by the economic team on Friday are also not very precise: “macroeconomic order,” “economic recovery,” and “deepening the process of deceleration of inflation,” but without mentioning what the quantitative “parameters” are.

currently, The stock is preserved and also has a 2% depreciation rate. It is set monthly by the government, defying pressures from further devaluation of the currency implied in alternative exchange rates.

This could lead to a widening of the gap between the official exchange rate and the parallel exchange rate, increasing the size of the potential devaluation that the announced “third phase” will include with the exit from stocks and the subsequent inflationary jump.

“The dilemma is adaptation today versus greater adaptation in the future. This narrative is politically unattractive, especially in light of the 2025 legislative elections,” the company noted. Financial Advisory Services In a report.