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The government promises to pay the largest debt maturity of the year on time
El Cronista
July 11, 2008

By Juan Cerruti

The BODEN 2012 comes due, the main bond that arose from the financial 'corralito'. Investors are worried. Savers opt to keep dollars in the mattress.

There is clear unrest among investors over the approach of the largest debt maturity of the year, while Argentina's access to the markets remains completely closed. However, official sources confirmed yesterday to El Cronista that the funds are ready to pay on time on August 3rd the US$2.5 billion, corresponding to principal and interest of the Boden 2012, the main bond that arose from the financial "corralito".

"The funds are there, and the country has no problems closing the year out comfortably," the sources explained. Strictly speaking, in the halls of officialdom they assure that the 2008 Finance Program is practically closed. They admit, however, that once the mood of the market improves a little they will have to work intensely to prefinance 2009.

The funds that the Treasury accumulated this year provide "more than those generated by the fiscal surplus" in various letters internally emitted to other dependent agencies of the public sector (like ANSeS and AFIP) and also from some bond placements that the government held with Venezuela. Another source of revenue is the BCRA, which in the past few months sent some of its holdings to the Treasury and also has the possibility of advancing more.

As El Cronista reported weeks ago, at the Casa Rosada they are working for at least a month and a half now on the hypothesis that the worst case scenario is that the markets could remain closed for the rest of the year. So, they do not rule out self-financing for the next five months.

The maturity that is coming at the beginning of next month is the largest of the year and it is usually watched by investors as the amount that must be disbursed by the government is important. At the Economy Ministry run by Carlos Fern ndez at the Central Bank, where Mart n Redrado is in charge, they are attentive to how the public could behave when collecting these US$2.5 billion.

The attitude that savers are taking will be a key barometer for the market climate. Today there are many who believe that the decision of the majority will be to take their money and stash it "in the mattress". Others, in turn, say that there will not be a few who deposit their savings in a fixed rate, trying to get rates that the banks pay. Fewer still believe that there will be investments in stocks and bonds, currently being hit badly.

It will be crucial to analyze the behavior of savers over the impact of the different variables that could generate imbalances in monetary and exchange rate areas.

The financial markets have been closed for at least two months for the country. This means that "over the drop in bonds and their low prices" the cost that the government will incur in emitting debt has become excessive. In the case of the Boden 2012 it rounds to about 14% a year.

The reason for the continuous sell-off of bonds should be found in the bad mood generated among investors from the conflict between the government and the farm sector, the manipulation of INDEC statistics, and the turmoil in the main markets of the world, particularly on Wall Street.