(Bloomberg) -- Alberto Fernandez’s victory in the August 11 primary elections has led some of Argentina’s private banks to reconsider their investment strategy, shortening investment terms to just one day, a change that reflects the uncertainty and volatility prevailing in the South American nation’s markets.
Last week, the banks opted to invest surpluses of money in instruments that pay a lower rate than the Leliqs, the notes issued by the central bank, because the former mature in one day instead of seven, according to data from the daily monetary operations report of the bank, known as BCRA. The stock of the BCRA’s so-called “passive passes” (repo) reached ARS 61.7 billion ($1.12 billion) in the last four days, or 13 times the average of the last 90 days.
Argentina’s central bank pays a 63% yield for this repo, less than the 75% offered by Leliq. “The banks are seeking to have greater flexibility to be prepared for an eventual withdrawal of deposits in pesos,” says Diego Chameides, head strategist at Banco Galicia, Argentina’s third-largest bank by net worth, according to the BCRA. “They relinquish some rate but manage to have immediate liquidity” in the case of any urgency.
The change in the investment strategy comes after a week of turbulence in the markets following the electoral setback endured by President Mauricio Macri.
Since the vote, the Argentine peso has depreciated 17.2%, the S&P Merval stock index dropped to half its dollar and the country risk doubled to 1,863 basis points. Savers withdrew 3.7% of total deposits in U.S. dollars in the three days following the election (almost $1.2 billion, according to the latest official data) and 2.8% of certificate deposits in pesos (ARS 35 billion).
Investing in Leliq seems less attractive to banks, despite offering 12 percentage points more in the rate than 1-day repos. The stock of these notes held by banks remains close to ARS 1.3 trillion, ($23 billion), according to the most recent official data, below the level before the August 11 election.
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