Passive euphoria in Argentine securities


However, we consider that the wrong reading: Argentine bonds marked a floor at the same time that the US stock market did and recovered at the same time they did all assets of the world. When the The United States stock market resumed its downward trajectory, the low-quality bonds (High Yield and Emerging) will fall again. Since Argentine bonds are the lowest quality within Emerging, it is expected that these will lead the new falls.

On the basis of this reasoning, any reader could conclude that the misfortunes of the Macri government come exclusively from the hands of international flows of funds. And in the immediate term, the answer is yes. What does that mean? What Macri's government time to do his homework and not be exposed to the vagaries of international credit markets has been in the past.

In 2016, after leaving the standard, the Macri loaned huge amounts of money without asking many questions. Together with Saudi Arabia, Argentina was one of the most indebted countries in absolute terms between 2016 and 2017. Why could he do that? Because the world was generous and the abundance of credit still existed. Probably, a any minister of Scioli would have lent him.

The important thing is to see what Macri did with the money. And the answer is that basically the Model K continued, without making a single structural reform. He acted like the little pig in that story that made his hut thatch. Now the winds of international oscillations are blowing and You can not change the foundations of the hut.

The main engine that allowed cheap and loose credit was the injection of money coordinated by the central banks of the US, Europe, China, Japan and Switzerland. Today this machine is in reverse: led by the US Federal Reserve as a whole, The world's major central banks will be removing liquidity in 2019. The same liquidity that caused many possible global financial errors, such as the granting of loans to Argentina, without any reasonable plan.

To put everything in perspective, Argentine bonuses marked its ceiling in October 2017. If we take into account the coupons that investors received and also the strong recovery of the last 20 days, we have: measured in dollars, Bonar 2020 (AO20D) accumulates a loss of 2.18%, Bonar 2024 (AY24D) falls 6.46%, Discount (DICAD) yields 21.76% and Centennial (AC17D) loses 15.10%.

Why do some analysts insist on celebrating each rebound as a trend change? Perhaps much of the explanation has to do with conflicts of interest.

If someone is buying Argentine bonds or recommending that their customers buy Argentine bonds, their analysis will be biased and, naturally, will tend to celebrate each recovery. What's worse: you probably recommend keeping, even if someone is losing and there are already visible signs that there will be less liquidity in the world.

The same trend that made it possible for Macri to take on a huge debt without much explanation, is now reversed. Even if Argentina avoids a restructuring or default, the bonds will fall sooner. And no one should have to go through this traumatic situation.

(*) Chief Financial Officer


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