The first Letes emission is coming, which the next president will have to pay
The cut-rate will reflect that event. In fact, the Argentine market is divided before and after December 10. So far, papers that mature before that date exhibit more or less logical returns for a country like Argentina, around 4.5% per year. That rate prioritizes the crucial fact that the dollars to pay these debts are insured with the bulky disbursements of dollars already made by the International Monetary Fund.
The IMF dollars are also enough to cover part of the 2020 maturities. The problem for the market is that they are not sure who will occupy the Casa Rosada as of December 10.
This uncertainty is not new and is already being reflected in the papers that expire from 2020 onwards, especially the shorter ones. The AO20 Bonus, due in October of next year, yields an exuberant 17.5%.
But the market already knows that the Treasury is far from validating an excessively high rate, which exposes the financial fragility of the Government.
They bring these accounts close to Minister Nicolás Dujovne. On Thursday, when Let’s was bid in pesos but linked to the exchange rate (Links), the offers that were above the cut-rate were very high, but not “crazy”. According to this newspaper, the orders that followed after the cut jumped to about 7% for the Link that expires on December 4. Taking into account that many dollars can also be submitted to the tender within the public sector, at the Treasury they do not rule out that they could cut at a maximum rate of 10%.
The jump in the interest rate for papers that mature after December 10 incorporates several fears: first, that Cristina Kirchner wins, then, that a friendly or compulsive renegotiation of the debt is established and, also, an unfolding of the foreign exchange market.
That is why the shortest bonds are the most punished because they are the ones that would suffer the most from an eventual capital cut and stretch of the term if the next government fails to generate confidence in the creditors.