Domestic bonds on slippery roads

BCRA head Martín Redrado

Investors do not move. They are eagerly awaiting US Federal Reserve's meeting next Tuesday, when US interest rates may be trimmed. At present, these yields settle at 5.25 per cent annual.

The entire globe is afraid of US economy slowdown. Inflation fears are no longer Fed's priority. Now, the entity endeavours to prevent activity drop.

With these data, trading in Argentine bonds was trifling: less than ARG$1.3 billion was made between the Electronic Over-the-Counter Market (MAE, in its Spanish acronym) and Buenos Aires Stock Exchange. This is less than half of a normal session. Debt swap bonds in pesos plummeted 0.75 per cent and GDP coupon in the same currency lost 2.2 per cent.

However, dollar-denominated bonds plunged, causing Argentine country-risk to climb to 477 points in JP Morgan Embi+.

Argentine bonds keep on stirring up distrust, as opposed to the other emerging instruments, which ended unchanged yesterday. With poor trading, post-default bonds in pesos and dollars went through widespread drops, ranging between 0.10 per cent and 0.70 per cent.

However, dollar had a calm day. Since there were no great bond movements, there were neither surplus of pesos from investors moving to the American currency. Moreover, 30-day time-deposit rate is climbing, taking away part of the public. Dollar continues at ARG$3.19 for sale in exchange agencies.

Argentine Central Bank (BCRA, in its Spanish acronym) intervened in market at the beginning of the day by selling dollars. Such intervention calmed down purchases. Only half an hour before closure, demand had disappeared. BCRA reserves tumbled to $43.17 billions after intervention.

In Forex-MAE (main wholesale market), dollar opened at ARG$3.1610, to afterwards end at ARG$3.1590. The American currency is highly offered for today: offer holds $70 millions, while bid $10 millions. Traders suggest that BCRA should lift restrictions on dollar inflow. Having to freeze 30 per cent of dollars brought into the country at less than one year is absurd in a moment in which the American currency is leaving Argentina. "Foreign dollars' entrance door is closed, while exit one is wide open," a trader said.

Nowadays, bond market only has domestic money. No dollars arrive to buy instruments. However, BCRA is not to be blamed for it, rather Argentine Statistics and Census Institute (INDEC, in its Spanish acronym). In the meantime, while rates rise in Argentina, US Treasury 10-year bond yield crashed to 4.32 per cent, the lowest level of the last two years.

In turn, gold touched $730 an ounce, the highest price in the last 26 years, because investors sought shelter again in this metal. Investment funds are great gold buyers, since they do not want to assume risks.

Banks have increased time deposits' rates. Great investors get paid more than 14 per cent in 30 days, while small- and medium-sized savers receive 10 per cent.

Argentines are living in another country. Disguised inflation bursts through interest rates.