Dollar-linked Debt Swap: Treasury Sees Low Participation Amid Month-End Pressure

The Treasury managed to transfer just over a third of the maturities of the Lelink D31G6, which matures on August 31, through a new swap for dollar-linked instruments maturing in September and October. The low participation keeps pressure on month-end commitments: Finance received 255 offers and redeemed $1.344 billion in nominal value of the original bond, equivalent to 34.12% of the amount in circulation.

In exchange, it allocated $1.354 billion in nominal value in the new notes, against offers of $1.737 billion. Demand was mainly concentrated on the shorter instrument, with $1.213 billion for the D30S6, maturing on September 30, at a cut-off price of $989.90 for every $1,000 of nominal value. Additionally, $141 million of the D30O6, which matures on October 30, was allocated at a price of $986.

Thus, almost nine out of ten dollars allocated went to the September maturity, while a much smaller portion extended the currency coverage until the end of October. Unlike a conventional auction, the operation does not seek to capture new pesos, but rather rearrange the maturity profile, replacing dollar-linked debt maturing at the end of August with instruments that have the same currency coverage but are one and two months longer.

The result, however, left about two-thirds of the original nominal value outside the conversion. According to economist Federico García Martínez, the acceptance was the lowest of the six operations of this type carried out during 2026 and open to the market, indicating that the Treasury managed to alleviate only partially the concentration of month-end commitments.

The conversion was carried out under Article 2 of Decree 846/24 and repeated the mechanism used by Finance on other occasions during the year. Specifically, investors delivered the Lelink D31G6 and received in exchange two notes that continue to adjust according to the evolution of the official dollar, although with later maturities.

Thus, the operation allowed reducing the amount that the Treasury must face on August 31, although without eliminating the concentration of maturities. García Martínez highlighted that, in addition to recording the lowest acceptance rate among the six swaps open to the market carried out this year, the operation leaves the largest volume of commitments for the end of the month among those precedents.

The economist also recalled that in the swaps of April, June, and July, the Government had previously carried out operations with the BCRA that modified the nominal value of the dollar-linked instruments in circulation. Therefore, the comparison between the different conversions is also influenced by the previous movements of bonds between the Treasury and the monetary authority.

The concentration of demand in the D30S6 shows, at the same time, that most of the investors who entered the swap opted to extend the maturity by just one month, while maintaining exposure to the official exchange rate. Only a smaller fraction accepted to transfer that coverage until the end of October.

The operation occurred in a context of still very reduced liquidity in the peso market. According to PPI, the stock of repos for one day was around $0.97 trillion on Friday, practically unchanged from the average of $0.96 trillion in the previous four sessions.

At the same time, short-term rates showed pressure again. The average caucion was 24% TNA, 120 basis points above last week, while the repo between banks, without BCRA intervention, reached 25% TNA, with a daily increase of 200 basis points.

From PPI, they emphasized that this increase cannot be attributed to the last debt auction in pesos, as the rollover of 100.3% had involved an absorption of only $10 billion. Instead, the market continues to operate with historically low liquidity levels and remains attentive to a possible participation of the Central Bank in the dollar-linked segment, which could also withdraw pesos from the system.

Meanwhile, the wholesale dollar remains below $1,500, with a weekly decrease of 0.7%. According to PPI, this movement brought the distance from the ceiling of the band to 25%, its highest level since the end of May.

For the brokerage firm, this dynamic shows that, in the current trade-off between rates and the dollar, exchange rate stability seems to be gaining more weight, even at the cost of maintaining higher interest rates. In this context, dollar-linked instruments continue to play a relevant role within the official financial strategy, allowing to absorb demand for coverage without it necessarily being directly transferred to the spot market.

The BCRA bought only $10 million this Tuesday, the second lowest acquisition since the start of the accumulation program, in a session with $344 million traded. With this result, the buyer balance for August rose to $339 million and the accumulated purchases in 2026 reached $13.666 billion, although the monthly pace continues to show a strong deceleration, with a daily average of $31 million compared to $103 million in July.

Thus, the swap allowed for a partial reduction of the dollar-linked commitment at the end of August, but without substantially changing the immediate maturity profile. The acceptance of 34.12% left most of the original Lelink still pending, while those who participated almost exclusively preferred to transfer the currency coverage until September rather than extend it until October.