Argentine Central Bank Blows $1 Billion To Support ARS Today, Fails

Update 3:  Reuters reports that the Argentine Central Bank spent $1 billion buying pesos today to support the collapsing currency... But, while it is off the lows, it remains down on the day and will close at a record low...

 

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Update 2: Freefall...

  • *ARGENTINE CENBBANK SAID TO INTERVENE AS PESO HITS 24/USD

As Bloomberg explains, the central bank's policy error earlier this year, in which it cut the rate despite high inflation, has proved horribly costly. Macri's whole project of economic reforms is at stake. Mention of the IMF brings back bad memories for Argentines and part of Macri's appeal was that he promised economic competence. This latest mess shows how hard it can be to return an economy to orthodoxy after years of improvisation and price-controls. Luckily, the next election isn't until next year and the opposition remains divided, but Cristina Fernandez de Kirchner hasn't gone away.

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Update 1: The Argentine Peso is now down 3% to a new record low and the central bank is desperate...

  • *ARGENTINE CENBANK SAID TO SELL $200M TO STEM PESO DROP

  • *ARGENTINE CENBANK SAID TO BUY MAY LEBACS AS YIELD HITS 50%

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It appears that 1275bps of rate-hikes, hopes for an IMF bailout, and promises-promises from government are not enough to halt the capital flight from Argentina as the Peso just crashed back to a new record low over 23 per USD.

With 7-day repo-rtates at 40.00%, still the currency is collapsing...

Ironically, BNP Paribas says the Peso is too risky to even short, even taking into account the carry return...

“...we prudently decided to close our tactical short 1m NDF USDARS at 23.75,” strategists led by Gabriel Gersztein write in a report,

“If anything, this is not the time to be structurally positioned in ARS assets, in our view”

But JPMorgan is even more concerned, warning that the peso may face “disorder” next week if the nation’s central bank struggles to roll over about $30 billion of short-term notes set to expire.

As Bloomberg reports, the central bank is scheduled to auction notes known as Lebacs on Tuesday, in order to roll over about 674 billion pesos ($30 billion) of securities that mature on Wednesday.

The yield on Lebacs due June jumped to 43.6 percent in the secondary market today, forcing the central bank to intervene in secondary markets.

“A failure in rolling over the maturing Lebac stock would lead to a disorder bid on the dollar and renovated capital outflow,” JPMorgan analysts Diego Pereira and Lucila Barbeito wrote in a note.

"The recent measures by the central bank, together with Lebac rates above 40 percent suggest the authority would be able to roll a significant share of the stock.”

Yields on ARGENT bonds are spiking with the century bond prices tumbling.

"Funds are liquidating their positions to cover withdrawals and pressuring the rate,” said CMF Bank Chief Financial Officer Juan Jose Ciro.

“The local situation is still ugly: the spot exchange rate won’t budge and the rate is firm. We are seeing the tail-end of the crisis, when it starts to hit retail investor."

Comments

surf2liv latasurf6 Fri, 05/11/2018 - 15:45 Permalink

likewise..60% of my friends called cristina .."Cretina"  for cretin..boy the ziopress got their panties in a bunch over her visiting a junior high school..and students asked her longingly...What should we read for Shakespeare..Romeo and Juliet?   and her curt reply  ...NO..merchant of Venice, ha..

In reply to by latasurf6

DownWithYogaPants JibjeResearch Fri, 05/11/2018 - 12:21 Permalink

It does not help that Latin american politicians are some of the most corrupt individuals I have ever laid eyes on.

Sound money in the form of precious metals // cryptocurrency would be a start towards shutting down all the nonsense.

If you could shut the nonsense down it would be like turning on a light switch. 

........and it's Argentina so they have SILVER

In reply to by JibjeResearch

Vilfredo Pareto Pearson365 Fri, 05/11/2018 - 13:48 Permalink

You have no idea what you are talking about.  Venezuela and Argentina have a lot in common.  Both have suffered from economic mismanagement.  If you have spent 75 of the last 100 years in default you don't get the benefit of the doubt from finance and trade, ever.  If Argentina could have a 25 year run of stable government budgets without deficits, and stable trade with growing reserves and no trade deficits, then they would not have these confidence issues roil the markets.  

 

That requires fiscal discipline though.  Sometimes you have to say no to government spending.

In reply to by Pearson365

east of eden Fri, 05/11/2018 - 10:47 Permalink

I’m really fucking sick of your psychopathic manipulations of currencies, wars, police brutality, constant survelliiance

you people are truly fucked, you just don’t fully grasp it yet.

Angry Plant Fri, 05/11/2018 - 11:17 Permalink

So what behind the collapse? Is it all those pesos that Argentina created as the counter point to expanded yuan trading? Did those yellow bastards convert pesos to dollars? Thus draining Argentina of it dollar reserves? No way the expansion of yuan trading is all up side for those involved right? 

AurorusBorealus Money_for_Nothing Fri, 05/11/2018 - 13:12 Permalink

Imports are taxed as well.  Argentina is a nation with few resource needs.  Therefore, the policy has been both to protect domestic industry and local consumers.  Most goods consumed here are produced here: from kitchen appliances to furniture to automobiles to construction materials.

The result of these tariffs is that a steak, which costs $7 anywhere else in the world, costs $2.50 here.  Good wine can be had for $4 per bottle, and so forth.  Argentina does not have the world's reserve currency, a petro Peso, nor the ability to bomb everyone into accepting the Peso as their money.  Instead Argentina uses tariffs to create jobs and keep prices low for consumers.

In reply to by Money_for_Nothing

my new username Fri, 05/11/2018 - 11:25 Permalink

Save this and repost it in 2028, 2037, 2042, 2058...
in 1925, Argentina was the world's #5 economy.
Latins plus indiginous = chronic corruption, failure, feudal rates of inequality and mind-numbing stupidity.
The Italians, Spanish and French have the Reverse Midas Touch.

silverserfer Fri, 05/11/2018 - 12:25 Permalink

South Americans seem to always take the path of least resistance and revert to a junta mentality. Dreams of socialism and democracy fueled with fiat money will NEVER work there. 

Money_for_Nothing Fri, 05/11/2018 - 12:40 Permalink

They could do lots of things that would work. But they would need good leaders which are in short supply right now. In a technical sense the Government needs to be funded by taxes and import duties. Their Government is funded by borrowing outside money and export duties. Just like Venezuela.

AurorusBorealus Money_for_Nothing Fri, 05/11/2018 - 13:36 Permalink

The Argentine government is funded by import/export tariffs and taxes.  The debt described in this article is denominated almost exclusively in Pesos.  At the beginning of 2018, Argentina had only approximately 140 million, with an M, debt denominated in other currencies.

The problem is government expenses.  1) Higher education is free here to everyone in the world... everyone.  This needs to change, though not in the extreme, because this policy attracts intelligent people from all over the world to study in Argentina.  A small tuition charge ($200 USD per year, for example) would increase revenues and reduce education costs (because many young Argentines remain in university, doing nothing productive, for years).

2) Too many government subsidies for staples.  For years, the government has been sending boxes of food to every household, paying a portion of the household gas bill, and so forth.

3) A welfare system that encourages immorality and sexual promiscuity.  The only occupation for far too many young women in Argentina is to become pregnant, as young as possible and as often as possible, to receive a government payment each month.  The ideal situation for too many in Argentina is for a single mother to have a few daughters at a young age.  These daughters can then become pregnant at 15, 16, or 17, remain in the household, and add additional income to the household for every new baby: a perfect-socialist familial commune who have made sexual reproduction a household industry unto itself.  The children in these female welfare communes grow up as near savages, with no discipline, manners, or ability to perform productive tasks.

In addition to this welfare system, romantic attachment to half-baked, early 20th century socialist intellectuals, such as Jean Paul Sartre and Simon de Beauvoir, is replacing sound 19th century conservative thinking (such as that of August Comte or Emile Durkheim) in the education system.  This fondness for 20th century socialist intellectuals has encouraged "free love" as "self expression" (and as a closet industry generating welfare payments) to replace sound morality.  Of course, this is problem for the whole of the West, but is striking in Argentina, only because the older, conservative intellectuals, are still taught here, unlike in Europe and the U.S. .

In reply to by Money_for_Nothing