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Buenos Aires — The Buenos Aires Stock Exchange has become more like a bureau de change than a traditional stock market: the bulk of the transactions have much more to do with foreign exchange hedging than with the profitability of investing in market securities. And the Argentine government is well aware of this, and has no qualms about damaging the parities of its own debt instruments in order to temporarily lower the financial quotations of the US dollar and, thus, gain a few hours of respite.
Between Tuesday and Wednesday of this week, the dollar spot (CCL), which is obtained by buying an instrument in the Buenos Aires Stock Exchange and then selling it abroad, went through the roof and public agencies began selling bonds to push prices down.
The AL30 US-dollar bond dropped 9.36% in a single day, to close Wednesday at 22.17% on the Buenos Aires Stock Exchange.
In addition to the damage self-inflicted by the Argentine government, there was a global flight to quality that impacted not only the parities of bonds issued under local jurisdiction, but also those issued in the United States. So much so that the GD30 bond fell 8.61% in the United States, to $24.15. This bond already costs 32% less than it did on March 17, hours before Economy Minister Sergio Massa announced that he was going to buy back the instrument.
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Market reaction
“The government made clear its intention to take any necessary measure to contain the dollar, which led to a 9% drop in the last half hour of the trading session, leaving the country risk above 2,500 points,” according to a report by Delphos Investment.
The MEP dollar had peaked above 425 pesos yesterday, before falling to around 410.
In the last quarter of the trading session, 100 million nominals were traded, which resulted in a nominal volume of 380 million, marking a record since the issuance of the security.
“The intention to contain the exchange rate is severely affecting bond parities, which are trading at the lowest levels so far this year, falling more than 30% from the maximum reached in February and trading close to values prior to the entry into office of the economy minister,” Delphos Investment.
On the other hand, roker Aurum Valores stated that “the government’s intervention in the last hour collapsed the prices of bonds in pesos and also in dollars”.
It should be taken into account that, according to a statement issued by the Oil Industry Chamber, soybean trading is delayed both due to weather conditions and to the strike in the country’s ports.
However, it does not seem to be a coincidence that the volume traded has dropped sharply in the last two days at the same time that the financial dollar soared, which considerably reduces the attractiveness of the program. It is for this reason, among others, that the Government needs the gap between the CCL and the official rate not to go through the roof.
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