The “financial spring” attracts investors from abroad. Exchange peace and the downward trend in inflation mean that real rates in Argentina become the most attractive in the region. And this was not only noticed by local investors, who used money laundering as a gateway to the capital market, but also by several international players that, in recent weeks, began to arrive “on tour” through the City, to learn more about the change in market trends.
Several international banks announced to their clients a change in perspective on Argentina. In the first months of the year, the main players on Wall Street had been cautious about Javier Milei’s economic plan: they had doubts about the Government’s ability to sustain the aggressive adjustment it announced and to successfully overcome the political weakness in Congress.
But for some time now, they began to “see” it: from Bank of America, passing through Morgan Stanley, Jefferies Financial Group and recently JP Morgan, They came out to recommend that their clients “increase their exposure” to Argentine assets.
And not only that, after years of absence, Some entities sent their executives to the southernmost part of the world to understand first-hand the new economic and, above all, political cycle.
In the last fifteen days, representatives of investment funds and international banks They passed through Buenos Aires, which seems a true sign of the times. “After years when no one came, suddenly we see a parade of banks. They are not interested in the weather in Buenos Aires in September,” said a local market operator.
Rate party
This renewed interest is reflected in the evolution of bond prices, in pesos and dollars, and in a strong narrowing the gap would change. The strategy known as “carry trade” has been around for more than 70 days of bonanzawith a gain close to 40% in dollars.
He Carry trade consists of taking advantage of peso rates while the dollar is still. For this to happen, two conditions must be met: precisely that the dollar does not skyrocket and that rates are reasonably high. Whoever has dollars, sells them and with those pesos invests in some instrument that gives an interest rate (fixed term or bond). After a certain period, with those pesos plus the profit from the rate, you buy dollars again. Since that currency is still and now has more pesos, it buys more dollars and you end up making a profit in hard currency.
In Delphos they explained: “In a context of stabilization of the macroeconomy in the country, with lower inflation and volatility in the financial exchange rate, “Argentine real rates are positioned as some of the most attractive in the region.”
For example, one of the inflation-tied bonds, the DICP, has a yield of 11.5%which represents, in local currency, the highest in the entire region.
“When adjusting these returns for the volatility of the exchange rate, the country is in second place, only behind Brazil,” the consulting firm added, while anticipating that the new addition of Luis Caputo to the investment menu in weights, the Boncapthey could achieve even higher real returns, in addition to helping to continue stabilizing the exchange rate.
Can the bonanza be sustained? Fernando Marull, from FMy Asociados, explained: “The risk balances are now tighter. With the gap at 20%, the risk of selling dollars to make the rate in pesos is greater now. You can continue until whitening effect ends, “But the risks are greater today than three months ago, when the dollar was at $1,400.”
Aurum analysts explained that the bicycle extends for more than 70 days, which presents the longest period in the last year. “A rise in the MEP dollar to $1,300 would leave as winners only those who began their carry in pesos before September 6,” they said.
“With the current level of rates and the MEP dollar, whoever enters a position of carry trade from MEP dollars today, you would need the MEP to be trading at $1,200 by the end of November to exit breakeven. Above $1,200 at the end of November the carry is negative, with an MEP below $1,200 the carry is positive,” they detailed in Aurum.