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Argentina Forces “Pesofication” of Dollar Assets – to Avoid Bond Payment due Monday?
wolfstreet.com / By Bianca Fernet, Argentina, The Bubble /
US$5.9 billion are due, but dollars are very tight at the moment.
Last Tuesday, Argentina’s securities regulator, the CNV, shocked markets by announcing Resolution 646 requiring that mutual funds price dollar-denominated assets in pesos at the official government rate rather than the market rate that is closer to the parallel or blue dollar. Despite efforts from banks and industry organizations to organize a longer time period in which to react to this change, Economy Minister Axel Kicillof refused to meet with representatives, and the law came into force on Friday.
Unlike other government interventions in the parallel market, this sudden “pesofication” of somewhere to the tune of US $15 billion worth of investor assets came as a real shock to the industry — as in, no one saw it coming.
So what would entice this government to force the conversion of dollar-priced assets held by mutual funds into pesos at the official rate? Mutual funds are investment vehicles created for small and medium savers. They have a low minimum entry point and up until last week were a way for Argentines to save money without squirreling away physical dollar bills in boxes buried under stairs. This measure actually hurt small savers and helped no one.
Previous interventions in the market have served to bring both the blue dollar and the bond-linked contado con liquidacion (ccl) or “blue chip swap” rates down. This shock caused bond prices to temporarily plunge and the blue-dollar rate to shoot up to record highs of 16.05 ARS/USD. Furthermore, the effects on the ccl market were short-lived. Before the announcement, the ccl rate was at 14.05 ARS/USD. It dropped to 13.19 before and has rebounded back to 13.85 ARS/USD. So in this case, the government temporarily brought down bond prices at the expense of small savers and the blue dollar. What gives?
The post Argentina Forces “Pesofication” of Dollar Assets – to Avoid Bond Payment due Monday? appeared first on Silver For The People.
Source: http://silveristhenew.com/2015/10/02/argentina-forces-pesofication-of-dollar-assets-to-avoid-bond-payment-due-monday/
