The US dollar rate went up in almost every segment, despite the strong rise in interest rates the Treasury approved on last Wednesday’s tender. The wholesale rate, which is a market reference, went over AR$1,270, while the Banco Nación price got close to AR$1,300.

The government had placed AR$4.7 trillion in the emergency tender, with the goal of absorbing the “excess” of liquidity that resulted from the end of the LEFIs. Fifty percent was placed on Lecaps with an expiry in the next 30 days.

In order to meet that goal, and hence relieve the pressure on the dollar demand, the economic team led by Economy Minister Luis Caputo validated a significant increase in interest rates. For example, the letter that expires in July had a Monthly Effective Rate (MER) of 3.3%.

Even so, the wholesale dollar rose AR$13 to $1,274, while the official retail dollar increased 0.3% to a purchase value of AR$1,235.52 and a sale value of AR$1,281.90, according to the average of financial institutions rates published by the Central Bank (BCRA). At Banco Nación, meanwhile, the “greenback” appreciated AR$15 to AR$1,290.

As for the dollar futures, contracts went up at every deadline. For the accumulated rate of July, the market is pricing a 6.8% increase on the wholesale value, although the expected monthly adjustment between August and December is an average 2.6%.

Meanwhile, in the stock market, the MEP dollar rate increased by AR$9.83 up to AR$1,279.8, and the difference with the official rate is 0.5%, while the blue-swap rate (known as CCL) went up AR$12.92 to AR$1,286.92 — a 1% gap.

In the informal market, the blue dollar rate held stable at AR$1,295. 

“The Treasury validated higher rates than the previous tender. As a reference, the monthly effective rate for the Lecap maturing on August 15 had been 2.78%. With an inflation rate that is expected to be below 2%, this means a real annual rate around 23%,” said a source at Max Capital.

For this broker, the situation is “something that could only be sustained temporarily, otherwise the fiscal front would be compromised. The tender left a bitter taste among foreign investors, who viewed the measure as a costly attempt to avoid a currency depreciation.”

“Compared to the secondary market at Tuesday’s close, the Treasury offered rates between 70 and 80 basis points higher, thus validating significantly higher yields,” PPI consulting sources added. “Considering yesterday’s secondary market, the reward was not insignificant: rates between 10 and 24 basis points higher.” 

Originally published in Ambito.com