Private Banks Sell Off Central Bank Debt Amidst Economic Plan’s Phase 2 Launch

The beginning of phase 2 of the economic plan was marked by a significant move from the banks. On Monday, following the announcement last Friday of the plan to transfer Central Bank debt to the Treasury, private financial institutions began to sell off part of their passive repo positions, causing the stock of that debt issued by the Central Bank to fall by almost 30% in a single day.

The passes are remunerated liabilities (exLeliq) that Javier Milei and Luis Caputo are seeking to eliminate in order to lift restrictions. These securities are used by the BCRA to absorb monetary surplus and banks buy them for a return on savers’ deposits. Last Friday, it was announced that these passes would be transferred to the Treasury at an accelerated pace through new Treasury bills (Leremo).

Despite this news, markets reacted negatively on Monday, leading to a rise in financial dollars and falls in stocks and bonds. However, it was explained that the drop in passes was due to “normal movements” at the beginning of the month in order to meet their needs.

Banks recognize that there are expectations for bonds with guarantees from Caputo that will be released shortly, so they want to see if they will not pay Gross Income and if they will be able to capture “higher rates,” as promised by Milei.