The War on Inflation in the Markets: Cost-of-Living Bonds Are the Most Demanded

The bonds that adjust for the cost of living were the stars of the market. President Alberto Fernández made the mistake of announcing 48 hours in advance that tomorrow “the war against inflation” begins. Everyone knows that when anti-inflation measures are announced, companies, supermarkets, suppliers and businesses want to get to that point with the highest possible prices to agree from a roof and not from the floor. In these 48 hours, food showed the negative effect with significant increases of up to more than 20% in fruits and vegetables.

Of course, as the announcement was made before the bond tender, on Wednesday afternoon all investors were bidding for the CER Bonds that accounted for 84% of demand and in some cases the award had to be prorated because the securities were not enough for everyone.

The shorter-term Boncers, such as the one due in 2023, rose 0.70% yesterday because investors sacrificed the rate because they believe that the coming inflation will reward them widely.

Small and medium-sized savers did not miss this issue and that is why UVA deposits, where money must be immobilized for a minimum of 90 days, grew by almost 5% in the first half of March and more than 23% so far this year. The speed with which these placements increase is accelerating day by day. It is enough to see the growth of fixed deadlines to verify this reality. So far this year they have increased by 15% and in the first half of March, only 2%. This implies that, in recent times, the growth rate of UVA fixed terms doubled that of traditional ones and they are the best option in the dispute against the dollar. Perhaps the rate hike expected today will reduce this growth gap.

The dollar, meanwhile, opened a lot of demand, 1.5% up, but with the course of the round the MEP dollar and the cash with settlement became almost the same and traders came out to arbitrate between the two dollars, because the cost of turning abroad was the same as for keeping it in Argentina.

Faced with the very small difference to exchange both dollars - less than 0.5% when there were times that exceeded 7% and it is normal for it to be between 3 and 4% - investors began to appear selling cable (the difference in price between the two dollars). This exacerbated the MEP supply and dollars ended with slight increases.

The MEP increased $1.80 to 195.73 and the cash with liquidation increased 82 cents to $195.74. Putting money into foreign accounts had no cost and there was a demand from the MEP to make that operation cheaper. In the marginal square, the “blue” rose to $203, but could not maintain that price and at the close it fell by $1 to remain at the same value as the previous day.

Debt bonds had another good wheel because Russia got Morgan Stanley to transfer dollars from frozen accounts to Citigroup to pay non-residents the maturities of not only government bond vouchers but those of Gazprom and other private companies. The Russian country risk fell 838 units (-27.61%) to 2,197 points. Russia's chances of default dropped from 80% to 47%, meaning that it is almost on par with Argentina. Before the war, Russia's country risk was 223 basis points.

However, the payment of the state and private debt of the Russians drove up corporate bonds. YPF and other local companies increased by more than 3%. Government debt bonds had a mix of increases and increases that left the country risk 21 units down (-2.1%) to 1,766 basis points.

The stock market continued to rise, accompanying the world. The S&P Merval increased 2.50% with deals of $1,184 million. The ADRs - certificates of holding shares and ETFs listed on the New York Stock Exchanges - had a good wheel. With deals worth $2,782 million, a volume lower than usual, Cresud (+6.85%), MercadoLibre (+6.80%) and Tenaris 5.01% stood out.

The rise in oil and gas caused the ETFs that represent them to have significant increases. The USO index, which measures oil companies rose 7.9% and the XLE energy index, 3.5%.

Another chapter of a story is expected today that, in addition to local problems, added that of the reappearance of Covid in the world and may affect it directly because it may continue to rise in fuel and food, which consolidate the rise in local inflation.

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