The second phase of the economic plan kicked off with a significant move by banks, following the announcement last Friday of their plan to transfer the Central Bank’s debt to the Treasury. Private financial institutions reacted by getting rid of part of the passive repo and stock of the Central Bank’s debt issued. This resulted in a nearly 30% drop in the stock in a single day, an unusually large decrease.
The passes, remunerated liabilities that Javier Milei and Luis Caputo aim to eliminate to lift restrictions, are securities used by the BCRA to absorb monetary surplus. Banks buy these securities to earn a return on savers’ deposits. The Minister of Economy announced on Friday that they would hasten the transfer of passes to the Treasury by issuing new Treasury bills (Leremo), informing banks on Monday.
Market reactions on Monday led to the rise of financial dollars, and a decline in stocks and bonds. The stock of passes decreased from $16 billion to $11 billion, attributed to dismantling public and private banks. The Central Bank explained this drop as normal movements at the start of the month while awaiting new debt instruments from the Treasury.
Banks are negotiating with the BCRA to eliminate all passive repo agreements through debt auction placements, anticipating new bonds from Caputo. Entities typically reduce repo operations at the beginning of the month, recognizing expectations for higher rates promised by Milei and Caputo. Some rumors suggest that banks exercised puts and eliminated swaps for liquidity, which authorities deny vehemently.
