Friday, October 16, 2020

Argentina cuts Leliq 2nd week and raises overnight repo

     Argentina's central bank lowered its benchmark Leliq interest rate for the second consecutive week and raised the overnight repo rate, continuing what it says is a harmonization of its monetary policy interest rates to maintain a positive real return on savings in pesos.
     The Central Bank of the Argentine Republic (BCRA) lowered the interest rate on Leliq notes by another 100 basis points to 36.0 percent it said in a statement from Oct. 15 and has now lowered it by 200 points this month following a similar cut on Oct. 8.
     Since December 2019, when BCRA began lowering the Leliq rate it has been cut by 27 percentage points from 63.0 percent, including 19 percentage points this year.
     The bank's overnight repo rate was raised another 300 basis points to 30 percent and this rate has now been raised by 11 percentage points this month following hikes on Oct. 1, Oct. 8 and Oct. 15.
      BCRA also said it was offering 7-day repos with a interest rate of 33.0 percent and "to complete the transmission of the harmonization of rates," it would also increase the minimum guaranteed rate of fixed terms with an annual yield of 34 percent for deposits of under US$1 million and at 32 percent for other deposits.
      The central bank's change in rates is likely to further encourage banks to shift their purchases toward Treasury bonds instead of Leliq notes.
      In September Argentina emerged from its 9th sovereign default since 1816 following an agreement with international creditors over the restructuring of $65 billion of debt.
      Argentina's peso was trading around 77.47 to the U.S. dollar today. down 22.7 percent this year.


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