Dollar: Demand for coverage skyrocketed as expectations of an exchange rate bounce rise

The demand for hedging instruments picked up last month against a possible devaluation surge of the peso. It grew, they matched in describing it to the market, the same rate at which the Central Bank (BCRA) was showing to rebalance its own reserves and access each new restriction in the face of the push. was imposed on. Gave the exchange difference to the official market.

And it was so fueled by the liquidity that was issued by that entity, when the CER in June embarked on a large-scale redemption of bonds with adjustable capital, for which there was a task Fears of a possible upcoming restructuring of a liability had injected more than $1.1 billion prior to launch. Which, due to continued inflationary momentum, is already growing at a rate of about $20,000 million a day.

Analysts and operators explain that the market is responding to changes Significant drop in expectations. And the number is crucial. “Trade volume continues to increase with dollar futures” And, for example, there is a constant arbitrage of mutual funds (FCIs) that invest in CER bonds to others that invest in instruments. Dollar is linked. One thing to note is that the entire market is looking for forex coverage”, explains Cristian Rios from Allaria Ledesma.

“The dollar vortex affected demand for instruments that adjust to changes in the official exchange rate, in contrast to the still fragile demand for the asset. are linked to inflation. In the FCI industry, for example, over the past seven days we were able to observe net subscription levels for funds pegged at $39.6 billion, while CER [atados a la inflación] He accumulated a bailout of $12,000 million in the same period. So far in July, the former recorded a net subscription of $54,000 million, while the CER segment had a net redemption of $100,000 million, as doubts about these instruments continue to exist”. AdCap Asset Management CEO Damien Colton agreed to point.

Data from Matba/Rofex, the most active financial derivatives market in the country, shows that The demand for this type of coverage has doubled in the last 30 days. The so-called “open interest”, which is nothing more than the total number of agreed futures contracts (one of the key indicators of liquidity and critical mass of the market) went from the equivalent of US$3,365,285 million in early June. , yesterday for another $6,591,369 million. And we must not remember that this is a location that, under these circumstances, usually remains with a single supplier.

Economist Fernando Camuso, director of Raffaella Capital, explains the transmission mechanism of the market: “Once all possibilities of buying arbitrage assets for cash with liquidations (CCLs) are closed, the race turns to paper. . Dollar is linked. and obviously If you have strong membership as an FCI, you have to go to RoFEX yes or yes: then prices and – consequently – futures rates fly”, he explains, referring to the underlying yields reaching between 128% and 144.2% (annual effective rate) for the August and September maturities in the recent past.

Those are rates that just came down somewhat yesterday, That would be a sign of the deepening of BCRA on that market, which comes at a time when its position is already between Rofex and MAE at around US$8 billion. (a market through which banks operate), dollar futures are barely US$1 billion less than the position limits imposed by agreements with the IMF.

complete with table Continuing growth that reflects bonds adjusted for the official dollar. “Those have been very positive days, with the week reaching 10%,” Colton notes.

For Neri Persichini, economist at GMA Capital, The current currency crisis “has a high component of political uncertainty.” This prompts companies and investors to look for ways to protect themselves, but it is not easy, as the cost of coverage has skyrocketed.

,The market lacks the tools to absorb the pesos of companies that have to get rid of their positions in seeders. For this reason, rates for official exchange rate futures rose significantly in the region of 130% and 140% yearly, higher than the peaks observed during the exchange run of October 2020. Also, bond dollar linked They were in high demand and their prices increased by 11% over the past six rounds, far exceeding the performance of the rest of the Peso options. As a result, a marked compression of yields was observed, for which T2V2 (expiring November 30) yielded -17% and TV23 (April 28, 2021) -11%”, he indicates.

Cohen’s strategist, Esteban Goethe, understands and shares forecasts made by the market. “One of the most worrying variables is the availability of reserves, which deteriorate day by day, due to, among other things, the dynamics of BCRA’s intervention on the foreign exchange market. With less availability of reserves, the rate of devaluation of the monetary unit is becoming less likely to be 4% per month, as happened in May and June. In fact, over the past week we saw a rate of devaluation travel at 90% annually, which equates to a monthly depreciation of more than 5%. And one cannot escape the fact that if we take into account that the foreign exchange earnings in the second half of the year are significantly lower than the first time, the situation may deepen.He explains by referring to the whole combo that encourages these expectations.

The most incomprehensible part of the matter is that the government does nothing to try to rearrange them and may even take measures to discourage the supply of foreign exchange from coming into force. while waiting for it to appear already.

it’s all in the middle of a Inflation that does not stop rising with exchange rate differences at the same levels as before “Rodrigazo” And with the dollar rising around the world, as the Federal Reserve continues to raise rates to try to calm its inflation. As far as there is no demand for safety net.