Argentine Peso Collapses To New Low Despite Massive Intervention

Update: *ARGENTINE CENBANK SAID TO OFFER $5B IN PESO MARKET AT 25/USD - That's 10% of reserves!!

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The Argentine Central Bank spent over $1 billion buying pesos on Friday (and another billion to buy short-term bonds back) to support the collapsing currency...

But... the weekend appears to have provided no confidence improvement for investors who are wary of this week's maturing bills (traders see Tuesday as key day for the BCRA, when it is scheduled to faces maturity of ARS673mm in Lebacs) and the potential delays of any IMF bailout...

However, 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” this 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 58.1 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.”

Some investors are spooked by the fact that, as Bloomberg reports, members of the central bank’s monetary policy committee met with representatives of the nation’s top banks on Saturday to discuss the recent FX volatility and Tuesday’s note auction, according to two people with direct knowledge of the matter.

Furthermore, the central bank asked banks to guarantee branches have enough cash on hand.

Comments

Antifaschistische directaction Mon, 05/14/2018 - 10:26 Permalink

Remember 5+ years ago...when Arg Peso was 5/1 with the $, and those Real Estate hucksters were pushing "ranch land" in Argentina as the best thing on the planet?

Problem is, if you ever wanted to sell and convert back to dollars...you just got hammered @ 24/1.

hey, Argentinians.  you should have bought gold 5 years ago.  (what version is this of the 'you should have bought gold' story?) 

In reply to by directaction

GreatUncle Pol Pot Mon, 05/14/2018 - 09:28 Permalink

Same fate for everyone.

Any attempt to resolve $1T in bad debt in a single location will result in $1T of bad debt moving to a safe location.

Attempting to bypass the problem maintains the problem and supporting it just makes it worse.

Only solution is pull everything at the same time no "bad debt" safe spaces to hide it in.

So everyone will get it at the same time otherwise it will just get worse and worse.

 

In reply to by Pol Pot

gaoptimize Mon, 05/14/2018 - 09:24 Permalink

I've been thinking about Argentina as a bug-out location and retirement option.  Does anyone know the property ownership laws for foreigners?  Now seems like the time to buy.

GreatUncle Yellow_Snow Mon, 05/14/2018 - 09:34 Permalink

If you buy energy with FIAT you ain't going to have an electronic device to operate that crypto wallet.

I swear people really need to understand crypto looks good but it has it limits.

The one good thing for crypto is you have a better chance of not losing it in a bail in by banks.

Please do not use crypto operated by a bank, you may as well use paper.

In reply to by Yellow_Snow

To Hell In A H… Mon, 05/14/2018 - 09:49 Permalink

It's all bullshit. Logic dictates the U.S dollar should be dead years ago. Yet Argentina with less debt by every conceivable metric compared to Uncle scam, is getting fucked, while the dollar rides high. But lets take it one step further. Trumpstein can introduce a $1 trillion dollar unfunded spending bill for infrastructure and the markets don't even fucking blink.

It's business as usual in this bizzaro world of make believe. What would happen if Argentina decides to undertake a $25 billion dollar infrastructure programme via Q.E? lol  The Yanks can pluck 40x that amount despite being in over $160 trillion in overall combined unfunded liabilities-personal and government debt and no market reaction?

Fuck this bullshit. No Yank on ZH, can explain the difference in Argentina spending and debt ratios vs Uncle Scam spending and debt ratios, and with anything approaching a modicum of commonsense, explain the difference in currency valuation and credit worthiness? The answer? FOREX IS FUCKING RIGGED! Fuck this bullshit.

AurorusBorealus To Hell In A H… Mon, 05/14/2018 - 10:58 Permalink

Yes, Argentina's debt to GDP is only 50.2% and increasing more slowly than U.S. debt to GDP.  The FX markets are rigged, but that is only one problem.  The other problem is that Macri caused panic among Argentines last week when he broadcast his intent to send Dujovne to New York to seek IMF funds.  Argentines, for some reason, are convinced that the IMF is Satan and that they will force very strict austerity on the country.  So they are seeking dollars as a safe haven.  It is an easy play for the investment banks to short Pesos and sell panic, especially when the president of the nation displays panic.

In reply to by To Hell In A H…

Give Me Some Truth To Hell In A H… Mon, 05/14/2018 - 11:07 Permalink

Difference between America and Argentina

We have the Numero Uno World Printing Press. Common sense says this magic printing press must be protected at all costs. (Since so many other nations also depend on our printing press, they will also help us protect it - which is convenient.)

P.S. We also have the world’s largest and mightiest military (and aren’t afraid to use it, or threaten to use it).

In reply to by To Hell In A H…

Dorothea Binz Give Me Some Truth Mon, 05/14/2018 - 15:11 Permalink

the truth is currencies are valued respective to other currencies. Virtually everyone abuses their own currency to some degree while the strength of the underlying currency provides an offset to abusive monetary policy. The US dollar still has value overseas. Foreign powers hold US debt to keep their currency lower in value so they can do more business in the US because they still value that dollar.

In reply to by Give Me Some Truth

U4 eee aaa Mon, 05/14/2018 - 10:24 Permalink

They should let it crash so exports explode and the country can get to work buying local and exporting

This idiotic banker philosophy that they need to protect the currency only hurts the people when it is artificially held up

Dorothea Binz U4 eee aaa Mon, 05/14/2018 - 15:05 Permalink

You seem to fail to grasp even the most basic of economics. If they allow their currency to implode, their exports WON'T increase. If that was the case, Venezuela would be flying high. When your currency collapses, inflation goes to the stratosphere and production drops like a rock. Then civil unrest leads to violent confrontations, people die, and sometimes a government is overthrown. After all that, and everything still sucks major time for years ahead.

In reply to by U4 eee aaa

JibjeResearch Mon, 05/14/2018 - 11:15 Permalink

Get your export products and services to trade with cryptos .... fools!

Learn the way of the cryptocurrency to protect yourself from the powerful warlords: the USD, the Euro, and the Yuan.