Poor bid in LEBAC and NOBAC

Something unusual happened on Tuesday in bid of Argentine Central Bank's Bills of Exchange and Securities (LEBAC and NOBAC): money offer from private sector failed to cover this week's maturities. It was a way of setting a floor to rate cut which has been observed in these tenders.

Maturities, Nobac's mostly, sum ARG$1.53 millions and offers from banks, companies and public totalised ARG$1.34 billions. Out of which, Central Bank took ARG$1.06 billions. In this way, Central Bank issued ARG$467 millions. However, Martín Redrado, head of Central Bank, anticipating that this may happen, increased on Monday rate at which it takes banks' swaps. This situation let the entity absorb a figure easing neutralization of this expansion.

Moreover, as the monetary program was comfortably fulfilled during last quarter (with surplus), Tuesday's expansion was not something to worry about.

On the other hand, there are no LEBAC and NOBAC maturities that may compromise the monetary policy in the future.

Due to this circumstance, Argentine Central Bank was forced to take more money at variable rate than at fixed rate, something rejected during the last tenders. The monetary authority preferred to opt for this variant so as not to rise LEBAC rates. On Tuesday, bids for ARG$815 millions in NOBAC at variable rate were accepted (76 per cent of total) as well as ARG$252 millions (24 per cent) in LEBAC at fixed rate.

NOBACs adjust by BADLAR rate plus a 2.5-per cent annual surcharge. BADLAR (variable rate) stems from daily survey Central Bank makes about rate paid by entities for 30-day higher-than-ARG$1-million time deposits. On Tuesday, such rate settled at 9.44 per cent annual.

Main information from Tuesday's bid is provided below:

LEBAC at 175 days: out of ARG$88.44 millions, Central Bank took ARG$85.44 millions at 8.35 per cent annual. This rate is equal to the one observed two weeks ago, because during previous auction, no bids at this term were received.

LEBAC at 252 days: ARG$10.9 millions were accepted at 9.95 per cent annual (0.05 of point lower than last week's).

LEBAC at 336 days: out of ARG$189.92 millions, ARG$153.92 millions were accepted at 11.455 annual (as last week).

LEBAC at 483 days: out of ARG$32.02 millions, Central Bank only took ARG$2.02 millions at 12.20 per cent annual (as last week).

NOBAC at 364 days, variable coupon (private banks' BADLAR + 2.5 per cent annual), remaining term 336 days: out of ARG$157.86 millions, ARG$132.86 millions at 1.155 above BADLAR were taken.

NOBAC at 728 days, variable coupon (private banks' BADLAR + 2.5 per cent annual), remaining term 707 days: out of ARG$865.90 millions, ARG$681.90 millions at 2.55 per cent above BADLAR were taken.