Argentina’s National Securities Commission (CNV, its acronym in Spanish) has published today in the Official Bulletin two modifications to the operations of sovereign bonds used to access the dollar. The government made this decision after a week in which the value of the informal and financial dollars recorded jumps that exceeded double digits in a few days. 

Last week, the value of the informal dollar rose 13.8% to a record value of AR$495. Financial dollars (the blue-chip swap rate and the MEP dollar) also recorded increases between 6.4% and 7.7% between Monday and Wednesday. 

The changes published today by the CNV are:

• Those who have short-term loans in force (taken or granted) will not be able to purchase financial dollars. In the Argentine market short-term loans that use financial assets as collateral are called “cauciones,” which operate similarly to margin loans. An investor may borrow pesos for a few days or may invest in this type of financial product.

• Some shareholders, managers, and employees of financial brokers may not buy and sell bonds in the same financial market in which the Central Bank intervenes by buying and selling bonds to control the value of financial dollars. Now, they can only operate in over-the-counter (OTC) transactions (this market is called “SENEBI” in Argentina). 

The reason why people who have active cauciones are not allowed to buy CCL or MEP is related to the interest rate policy implemented by the Argentine Central Bank. Currently, the Central Bank sets the level of interest rates that banks have to pay to their depositors and that works as a reference for the whole financial system. 

Ariel Sbdar, CEO of Argentine fintech Cocos Capital, explained to the Buenos Aires Herald that today the rates of cauciones are similar to money market yields (which in turn are below those of certificate of deposit). These rates of cauciones are set by supply and demand. Sebastian Negri, the president of the CNV, told the Herald that there are currently a lot of pesos being offered through cauciones by Money Market Mutual Funds and that drives down the cauciones rates. 

Until today, due to the imbalanced nature of the relationship between the different interest rates, Argentine investors had incentives to borrow pesos and buy dollars. With these new rules, they will no longer be able to do so. 

Regarding the modification for brokers, official sources told the Herald that the objective of the regulation is to prevent brokers from buying financial dollars in the financial market —where the Central Bank intervenes directly to contain the value of CCL and MEP— and then turn around to sell those dollars in the OTC market at a higher price. 

Negri explained to the Herald that not all managers and employees of Argentine brokers will be excluded. They must be “qualified investors” with investments of US$300,000 or more. 

Towards the middle of last week, a senior national government source who asked not to be identified told the Buenos Aires Herald that the sharp acceleration in financial dollars was not the responsibility of the banks but mainly of financial brokers, who had increased operations.