ARGENTINA: Republic of Argentina (ARGENT; Caa3pos/CCC/CCC): Feb. Inflation
"ARGENTINA FEB. CONSUMER PRICES RISE 2.4% M/M; EST. +2.30%
ARGENTINA FEB. CONSUMER PRICES RISE 66.9% Y/Y; EST. +66.80%
ARGENTINA FEB. BUENOS AIRES CONSUMER PRICES RISE 2.2% M/M
ARGENTINA FEB. BUENOS AIRES CONSUMER PRICES RISE 68.6% Y/Y" - BBG
Neutral for bond prices
• February inflation of 2.4%, in line with the range of consensus expectations, was a bit higher than the 2.2% reported for January with food and beverages expected to be higher while on an annual basis inflation came in at 66.9%, down significantly from 84.5% last month. We don’t expect a market impact from this data.
• As expected, a big increase in meat prices drove the overall food and non-alcoholic beverage component to rise 3.2%, according to Infobae.
• The BCRA’s latest market expectations survey (REM) projected declining inflation in the months to come with expected inflation of 2.2% for March, 1.9% for April and then looking ahead to a 1.5% decline in August then 23.3% for calendar year 2025, according to Infobae.
• We don’t see a short-term tick up in inflation due to volatility in some food groups as worrisome. Policies such as free market reforms, maintaining stable FX rates and encouraging investment will be supportive of disinflation in the long run so focus should be on October elections, the IMF program, timing of lifting of capital controls and a return to the International capital markets to keep those disinflation policies in place.
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US: FED Reverse Repo Operation: New Multi-Year Low Usage
RRP usage falls to the lowest level since mid-April 2021 this afternoon: $67.670B vs. $76.446B on Tuesday. The number of counterparties falls to 27 from 36 prior.
GERMANY: Bundesbank Debt Brake Proposal Would Follow Up 2022 Paper
Bundesbank President Nagel said Wednesday the Bundesbank is set to publish a debt brake proposal after the German parliamentary elections on February 23, Bloomberg reports. All mainstream parties except the pro-business FDP have signaled at least some readiness for reforms following the vote.
- A qualified majority would be needed for Bundestag passage.
- While any actual adjustments will come down to the political process, the Bundesbank might try to provide some input for the ongoing debate on the topic, and indeed, it already had published a debt brake review proposal in April 2022 - some key excerpts from that below:
- A proposed change on the cyclical adjustment of the net issuance allowance would allow "more time to adjust in the event of revisions to expected economic developments and tax revenue forecast errors. This would make it easier to stabilise budgetary policy and avoid procyclical stimuli."
- Some additional adjustments would make sure that "in contrast to the increasingly flexible manner in which the debt brake is being used [it was suspended four consecutive years 2020-23], such reforms could reinforce its binding effect. Specifically, budgetary developments could be stabilised by recording interest expenditure on an accruals basis. In addition, credit balances on the control account resulting from not borrowing up to the borrowing limit could be netted against emergency loans."
PIPELINE: Corporate Issuance Roundup: $2.25B Bell Canada Launched
- Date $MM Issuer (Priced *, Launch #)
- 02/12 $2.25B #Bell Canada $1B 30.5NC5.5 6.875%, $1.25B 30.5NC10.5 7%
