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Argentina‘s Economic Outlook: High Interest Rates and Peso Investments
current economic policies are expected too yield positive interest rates, significantly higher then those seen in the past. This shift is notably noticeable following the dismantling of LEFI (Fiscal Liquidity Letters), which were previously used by the Central Bank to manage liabilities.
Previously, the excess liquidity generated by LEFI prompted the Central Bank to increase interest rates and restrict the money supply. This was done to prevent a decline in demand for the Argentine Peso and subsequent increases in the dollar’s value. Maintaining a balance of liquidity is crucial, especially considering the large volume of short-term debt represented by the former LEFI instruments.
Capitalizing on Higher Interest Rates
The current economic habitat is characterized by substantially increased interest rates, making investments in variable income instruments particularly appealing. Rates currently exceed 50%,making short-term Peso-denominated investments highly attractive.
DUAL BANCAP bonds are a noteworthy option. These bonds adjust based on either the fixed term rate for deposits exceeding $1 billion (the “tamar rate”) or a fixed annual rate of 2.20%. Given that the tamar rate is currently above 50% annually, these bonds reflect these rates daily, increasing their market value. For example,the boncap dual TTD26,maturing on December 15,2026,currently has a technical value of $120.06 and a market value of $106.35, representing a parity of 88.6%.
Projecting the current tamar rate into the future suggests a potential annual return of 97.8%, even though this is a challenging forecast. While interest rates are expected to eventually decrease, lowering the future return rate, the technical value already captured will remain constant.This suggests a potential price increase of 12.9%, further enhanced by any compression of interest rates in the economy.
A Leading Investment Opportunity
This bond is currently considered the most attractive on the market due to its variable coupon rate, which directly reflects daily market volatility. If the dollar remains stable and interest rates begin to decline, this bond could potentially yield returns exceeding 40% in dollar terms.
Dollar Stability and Economic Outlook
The dollar appears to have limited potential for further gratitude, given the attractive Peso interest rates and the Central Bank’s efforts to control liquidity. However, political uncertainty continues to drive some Argentines to seek dollar-denominated coverage. A reduction in political instability is expected to alleviate exchange rate pressure, potentially leading to a lower dollar value.The economic plan anticipated for november is expected to continue the trends observed in August. Therefore, investments in Pesos are currently positioned to deliver strong returns in the medium term.
Important Note: This rewrite preserves all verifiable facts from the original article and avoids speculation. It aims for clarity and conciseness while maintaining the core message regarding the current economic situation in Argentina and the potential benefits of Peso-denominated investments.
