The government obtained AR$400 billion yesterday in the first bond auction of the month, around a third more than its immediate financial needs.
Financial Secretary Eduardo Setti reported that AR$294.3 billion matured yesterday and that the Economy Ministry received offers for AR$636.83 billion. Setti also said that AR$401.68 billion were effectively allocated.
The net financial balance of the Treasury is AR$326 billion.
The government offered three short-term instruments and another bond to be used as reserve requirements.
The first instrument on the list was “Letra de Liquidez” which will mature on February 28 and was only available for mutual funds. The others, which brokers that belong to the Market Creator program could acquire, were the S31Y3 LEDE bonds that mature on May 31, and X16J3, an inflation-adjusted bond due for payment on June 18.
The LEDE bond had a 118% effective annual rate, while the previous LEDE had one of 112.50%. With a 98.8% annual inflation rate, the rate was positive by 20 points. It is worth noting, however, that the crawling peg (the peso depreciation against the dollar) was 5.5% in January.
There was also a bond that pays the Badlar rate (now at 70.81%) plus 0.7%, maturing on November 23, 2027, which is used by banks for reserve requirements.
According to broker Aurum, the rate the Treasury paid for the LEDE bond was “in line” with market. “This leads us to the estimation that in both the LEDE and the LECER —albeit to a lesser extent— there was public participation,” the report read.
Aurum estimates that out of the total allocated by the Treasury, 38% was acquired by the public administration and 62% by the private sector. “Since virtually everything that matured was in private hands, the net private rollover was around 85%,” their report read.
This was the first bond auction since the opposition coalition Juntos por el Cambio called the national administration’s debt in pesos “a time bomb” in a press release last week, which some observers interpreted as an implication that the opposition would not pay the peso debt if it triumphed in October’s elections.
PRO, one of the parties in the alliance, tweeted a gif of dynamite exploding, captioned “AR$10,000,000,000 debt”, and wrote: “the Central Bank’s debt forces the government to keep printing money and Argentines to live with 94.7% inflation.”
Government officials denied this and said the peso debt is sustainable.
The X16J3 inflation-indexed bonds received some 56% of the total offered amount. Last week, a report by consulting firm EcoGo forecasted that high inflation, revealed to be 6% in January and 98.8% in the last 12 months, was prompting investors to “lose appetite” in fixed-rate bonds and turn to instruments linked to the price rise instead.
The next bond auction will take place on February 27.