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Wednesday, December 07, 2022

Dual Bonds: How to Hedge Against Inflation and Devaluation at the Same Time

Given the uncertainty about what might happen to the dollar and inflation, the government decided to offer a bond that is highly sought after by investors.

US market cut his 14-year bull run and continued to deepen his decline. Although the cycles are not linear, in the sense that there are temporary rebounds, we are still far from seeing the end of the downward movement. in that respect, double bonus Begin to shape up as a way to hedge against Argentina’s risks: inflation And this devaluation,

We all know that someone who lives in the peso loses against prices moving at a rate of 7% per month, loses against interest rates on the order of 6%, loses against the dollar, although many declare that are a sharp exchange rate jump What doesn’t happen evenly is a daily devaluation that tries to follow inflation. Therefore, the investment should be made to try to lose the least amount of weight.

To this end, the saver has access to instruments ranging from the classic traditional fixed term, or dollar, to instruments that investors use to become more involved with investments, such as fixed-term grapes, bonds, and bills.

We have already talked about fixed terms several times, explaining that grapes, which are adjusted for inflation, are more convenient than traditional at the moment. Also bonds that we can find at a fixed, variable rate and also those that adjust for inflation or dollars.

But given the great uncertainty we’ve had in recent months about what might happen to the dollar and inflation, the government decided to offer a type of bond that’s not new, but not overwhelming either. These are double bonds that are adjusted for inflation or the dollar’s value, and are the instruments that investors are most demanding in the latest government debt auctions.

Why does the government offer these titles? Because given the need to find money to finance the deficit, it is important to bring in a kind of instrument that the public wants, otherwise they would not invest and given the current uncertainty This way it is guaranteed that you will get the best results against the two determining variables on our money performance.

Double bonds take shape as Argentina’s hedge against risks: inflation and devaluation

Double Bonus: How They Work

And bono dual a tool that Subscribe to Peso and Pay with Peso (It is important to note this point, it is not charged in dollars) but whoever receives it can choose when it expires If you receive pesos that differ in official dollars or according to CER (inflation) plus a rate that can be 2% or 2.5% depending on the maturity of the bond.

it gives you investor coverageknows that it will neither lose against the dollar nor against inflation.

And this is what was being sought in the present context. Apparently it became the most sought-after bond, yielding up to -9 percentage points of inflation in the secondary market.

But it is a good option for those who are skeptical about the possibility of a devaluation jump in the coming months.

So who wants to invest in Peso today has a wide range, let’s look at the main options:

    • Traditional fixed term, minimum period is 30 days and they pay monthly rate of 6.25%, 107% tea
    • Fixed-term gratuity, minimum term of 90 days and pay inflation plus 1% per annum.
    • Fixed rate bonds such as the TO23 and TO26 with annual IRRs of 105.92% and 100.98%.
    • Variable rate bonds such as TB23P and PBA25 with annual IRRs of 103.58% and 106.6% respectively.
    • CER-adjusted bonds like T2X4 and TC25P which generate inflation +9.17% and 9.71% respectively.
    • Dollar linked bonds such as TV24 which pay a variation of +1.03% to the official dollar
    • Double bonds like TDS23 which have an IRR of -3.19%

The US market cut its bull run, which lasted 14 years, and continues to deepen its decline

Adjust portfolio according to investor’s profile

There is an extensive menu of options, here I mentioned only a few bonuses in each category, but there are others where clearly Profitability depends on the periodaccording to him the risk you are willing to accept, You can choose or choose what would be better to create a combination to deliver the risk and the profitability sought.

For example, as a banking client, I may choose a traditional fixed term if I believe inflation has fallen from 6.25% in September or a grapevine fixed term if I believe it will continue above those values. Stayed.

If we want to do something more risky, like bonds, then I have the option of a fixed rate bond, if I think we’ve seen a rate peak by the government, or else I’m likely to have a variable rate. If I fear inflation will continue to accelerate, I have cer bondIf I see a bounce potential on the exchange Bonus Dollar Linked, If the uncertainty persists, the double bond covers me for both risks.

For this, it is advisable to consult with your financial advisor to find a portfolio that fits the individual profile of each investor.

So, dear readers, take some time to see what they do with their money because whoever holds the pesos loses. Until next week.

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