The new Bonte allows the government to cover almost all of July's maturities.

The Ministry of Economy managed to raise USD 1,000 million through the issuance of a peso-denominated bond that was subscribed in dollars by foreign investors. With these funds, the Government will be able to cover most of the foreign currency maturities it will face at the beginning of July.

The operation will allow the Treasury to strengthen its account at the Central Bank, without impacting net reserves, since this money is not part of the BCRA's assets. However, it will increase gross reserves, a key indicator to demonstrate strength to creditors and international organizations.

Objective: pay USD 4,300 million in restructured bonds

The funds obtained will allow the Government to meet the payment of USD 4,300 million corresponding to the bonds restructured in 2020, which mature in the first days of July. Without full access to debt markets, the Executive resorts to its own resources.

At the close prior to the auction, the Treasury's account at the BCRA accumulated USD 3,040 million, so this new placement brings the Executive closer to meeting its most immediate commitments.

How the Bonte works and what sets it apart

Unlike classic dollar-linked bonds, where the investor invests and collects in pesos adjusted to the exchange rate, this instrument—nicknamed Bonte "hard peso"—allows entry with dollars but payment in pesos at maturity.

• The bond is governed by local law, not foreign jurisdiction.
• It offers an annual rate of 29.50%, higher than market expectations.
• It includes a repurchase put for May 2027.
• It doesn't increase total debt, since it allows for a 100% rollover.

This is the first peso-denominated placement for international investors since 2016, when Mauricio Macri's government issued the "Botes" with rates between 15.5% and 16%.

The impact on compliance with the IMF

Despite the inflow of foreign currency from this new bond, the reserve accumulation target agreed with the IMF still appears distant. According to consulting firm LCG, USD 3,300 million would still be needed to reach the target set for June 13.

This shortfall could widen if the Central Bank doesn't finalize in time the expansion of the Repo loan it is negotiating with international banks, as anticipated by its head Santiago Bausili together with Minister Luis Caputo. In addition, there are pending disbursements from international organizations for another USD 796 million.

The view of the economic team

The Government downplays the urgency of meeting short-term targets. Officials state that the agreement with the IMF was designed with the intention that the BCRA accumulates reserves in a sustained manner, and emphasize that the important thing is the trend, not the quarterly cutoffs.

In addition to the new Bonte, the Central Bank is evaluating other tools to strengthen reserves without altering the monetary base:

• Dollar purchases if the exchange rate hits the floor of the floating band.
• Issuance of dollar-denominated debt by provinces.
• The Repo loan with international banks.

These avenues seek to avoid issuing pesos to acquire foreign currency, a strategy that Economy aims to rule out entirely in order not to have to absorb liquidity later.