Sunday , July 25 2021

Red hot markets, in the rhythm of politics and crazy prices – 25.04.2019



At the cash tables of the major banks operating in Buenos Aires, they watched with astonishment the screens yesterday morning at the beginning of the financial day.

On April 25, hour per hour

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COUNTRY RISK "On points



EXCHANGE OF THE PRICE OF WHOLESALE »In Pesos



source: BCRA | MARKET DATA
infographics: hunting horn

The dollar looked stronger against the rest of the world's currencies, which made the assumption of a tough day for the Argentine peso. And the risk of the country has risen close to 1000 points driven by the collapse of bonds in concerted operations in Europe.

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In this area, the first dollar price that appeared on the Buenos Aires screens was already 4% higher than the previous day. And with a few operations on the screen, she was close to $ 47 pesosIn this context, they heard again complaints about the size of the exchange group, which allows Central to act only on the money market only when the price exceeds $ 51.45.

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Conscious of these allegations, the position of the monetary authorities is that it would not be convenient to interfere with the market to counter the global current. And less if the dollar increases against other currencies, as it happens in those hours. – If we put a ceiling on the dollar we reduce dollarisation of portfolios for those who want to leave. If someone wants dollars, to pay the price determined by the market and not the Central, they defend themselves in the government.

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This little scene from everyday life in the financial market, of which hunting horn He was a direct witness who synthesized one of the main complaints in the market: the failure of the Central Bank to operate in days of high volatility and tension.

As is well known, Central will only sell $ 150 million a day if the US dollar exceeds $ 51.45. This means that there is a 15% gap between the current price and the stock market's ceiling.

The episode of the sharp rise in the exchange rate with several operations last yearwhen in a few options the Central Bank can not intervene through an explicit ban on the International Monetary Fund. This red light was disturbed by former power plant president Luis Caputo, although he warned that after leaving the obstacle, he signed his resignation to the position.

Official sources point out: "We have no hands but that does not mean that the exchange rate can not move: on the one hand, the risk rises by 100 points a day and a 3.5% (Wednesday) rise in a country with 4% The real one depreciated in half, but its debt did not move and its inflation was 10 times less than ours. "For the market, this reasoning is correct, but perhaps not appropriate for such a period when the government there is a continuity of power.

Bond market specificity: On Wednesday, the "stop loss" triggered by some investors was activated, so the computer system that triggered the orders at a certain price activates the sales order. For example, if "Stop loss" Bonar $ 24 to $ 85 when the bonus reaches this price, the order is triggered automatically.

What happened on Wednesday and partly yesterday was that there was none of the buyers. And the system changes the sales price until a buyer appears.

It was remarkable, for example, what happened to Bonar 24. It was closed on Wednesday at 84 dollars, it dropped to 77 dollars and from there rebounded to 86.10. A difference of almost $ 10 in one wheel, Movement of crazy prices which can only be registered in a fully shifted market like the one observed in those days.

In banks, they attribute the internal leap to the emergence of some foreign funds that have benefited from the panic sold. In the afternoon, statement of Mohamed El Erian, of the Pimco investment fund (one of the largest in the world), which suggests that at these prices it might be worth increasing the proportion of Argentine assets in the portfolio. In the Ministry of Finance, they have registered operations of two funds, which they believe in the Treasury believe that even in a default scenario, they would do a good business.


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