Relief as short-term rate slides to 8%

Interbank rate development

Interbank rate plummeted yesterday, rolling back to pre-crisis levels. For one-day transactions, call money was agreed at 8 per cent, the lowest value of the last three months.

This rate had reached to 27 per cent by mid August and, during the last days, it had settled around 13 per cent. However, strong commitment of Argentine Central Bank (BCRA, in its Spanish acronym) to pump liquidity into market through active repos at 11 per cent annual and pesos surpluses in the hands of banks led yields to fall sharply during the last two days.

Difficult

Despite this, it's estimated that short-term rate cut will take a long time to transfer to credits. It would be difficult to reduce them, particularly in lines such as mortgage or personal loans, due to current inflationary acceleration.

Fed rate trim also decompressed international outlook. Foreign banks, in view of this, abandoned their extreme caution and placed pesos in market. Or, at least, in some cases, they stopped asking them.

BCRA officials expected a retreat by this time of the month, since banks had been accumulating a significant "black". In financial slang, this means that they had decided to keep surplus pesos in the monetary entity's accounts, but which have no remuneration. Therefore, it was impending that they would go out to place those funds, situation rushing after US rate cut.

However, apart from interbank rate decrease, the most outstanding piece of information is that high-term rates have also started to react. For the time being, BADLAR hit below 14 per cent. BCRA wants it to hover around 11 per cent and 12 per cent.

There has also been a significant reduction in cost electrical appliances corporations have to pay for placement of financial trusts.

Consubono

Yesterday, a new series of the instrument Consubono from the firm Frávega was placed at 17.90 per cent, quite below the 25 per cent the company Megatone paid last week. Of course that was a small placement (only $22 millions) with a 5-month duration. A piece of information reflecting greater market liquidity was the fact that bids more than doubled what the entity came out to seek. It's estimated that, in the following days, new trusts will be placed, in view of reigning peacefulness.