Buenos Aires Times

economy SUPER TUESDAY

Gov't on edge over Lebac expiry, June inflation data

Holders of short-term peso-denominated Lebac bonds are allowed to demand settlement today on 50 percent of the Central Bank’s Lebac stock.

Tuesday 17 July, 2018
Finance Minister Luis Caputo addresses Congress.
Finance Minister Luis Caputo addresses Congress. Foto:Télam

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The Central Bank says it is confident it can roll over 73 percent of the 529.32 billion pesos (US$ 19 billion) worth of short-term peso-denominated bonds known as Lebacs that expire today.

Holders of Lebacs are allowed to demand settlement on what equates to 50 percent of the Central Bank’s Lebac stock.

The exchange rate was stable in early trading on Tuesday, with the dollar fetching around 28 pesos at banks and exchange house, Ámbito Financiero reported.

Observers believe the Central Bank under the new leadership of Luis Caputo will maintain interest rates on expiring Lebacs at 47 percent, in line with the rate on the notes that expired in June, when only 60 percent were rolled over.

The Bank wants to secure reasonable success in rolling over the notes without compromising the exchange rate.

For risk-averse small investor, the peso-denominated debt instrument known as the Lebac has undoubtedly been the starchoice since Mauricio Macri assumed the presidency in 2015.

INFLATION

It is a big day for the government, since the so-called “Super Tuesday” for expiring Lebacs coincides with the release of INDEC statistics bureau data about June inflation.

Observers believe June’s will represent the highest rate of inflation for any month in two years, at between 3.5 and four percent, for a total of 15 percent so far this year.

The government had set a 15-percent inflation target in December but was forced to drop its big expectations following the impact of the peso’s heavy devaluation in the second quarter.

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