The National Securities Commission (CNV, by its Spanish initials) announced new restrictions on authorizations to buy bonds in US dollars on Thursday. Only investors who did not buy US-dollar bonds in the last 15 days and commit to not selling them in the next 15 will be given access.

The decision comes in the run-up to the primary elections when investors typically dollarize their portfolios and is designed to address an arbritrage maneuver capitalizing on the Central Bank’s intervention in the bond market.

Through the arbitrage maneuver — popularly known as “rulo,” Spanish for curl — investors bought immediate-settlement bonds and sold them with two-day settlement periods. This meant earning up to 2% more in US dollars since government intervention led to the same bond having different prices.

A CNV source told the Herald that the measure “perfects the regulation to ensure that the trading volume in sovereign bonds in dollars is genuine, eliminating the influence of arbitrage and ensuring a more accurate representation of real asset transactions.”

The source added that the measure only affects “sophisticated investors or arbitrageurs,” who “exploit differences in the prices of the same or similar assets on different trading rounds,” and not average investors.

Some brokers had a different take. “Taking such a measure eight days before the primaries indicates that [the government] is in an extremely critical situation in terms of reserves and that they are using up a lot of dollars for the [market] intervention,” Pablo Repetto, Head of Research at the Aurum broker, told the Herald.

Consulting firm Ecolatina calculated that, during the first semester, the government used US$1.2 billion to intervene in the MEP dollar market. The MEP dollar is the exchange rate implicit when investors buy shares or bonds in pesos and sell them in dollars in the local market. 

Another consulting firm, 1816, put net international reserves close to negative US$10 billion after the last payment to the International Monetary Fund.

However, Repetto said, “the market is not responding” the way the government expected. 

“Today, a new exchange rate gap between the immediate settlement MEP [exchange rate] and the 2-day settlement MEP was opened,” he told the Herald. “And the trading volume is still high.”

According to Aurum, at 15:00, the traded volume for GD30 and AL30 bonds — which are affected by Thursday’s measures — was close to US$65 million, a similar figure to that of the previous days. “If their goal was lowering the trading volume, they are not achieving it.”

The day the restriction was implemented, the blue informal dollar reached a new high,  reaching AR$577 the unit. The MEP dollar jumped by 0.3% and ended at AR$514 while the blue-chip swap rate was AR$576.7.

Thursday’s was not the only recent government measure to stop the bleeding of international reserves, as last week it imposed a new tax on imports and launched a new preferential exchange rate for agricultural exporters.