Within the universe of fixed income in pesos, the BONCER, CER bonds -those that adjust for the Reference Stabilization Coefficient, that is, inflation- were until now the segment of better performance and that dynamic explains a good part of the debate that is going through the money tables today. And the thing is, the long section of the CER curve, that is, the securities maturing from 2028 in forward, accumulated in 2026 increases measured in dollars that average 19%, while the sovereign bonds in hard currency They exhibited in that same period a average drop of 1.3%.
The proposal that began to circulate with more insistence in the City does not propose an indiscriminate departure from the CER or a total renunciation of coverage in pesos, but rather a gradual rotation from those bonds that rose the most towards other instruments which today offer a more balanced relationship between expected return, exchange rate risk and valuation. In this framework, the City proposes two specific movements that summarize this view quite well:
- Sell TZX28 to move to AL30
- Sell DICP to move to AN29
The central argument behind this strategy is not limited to a general preference for dollar bonds, but rather rests on a specific reading of the real exchange rate that today is implicit in market prices.
Argentina today shows a real exchange rate that does not look especially high: the index is located at 84 against the official dollar and at 87 against the MEP. When the yields of bonds in dollars such as the AL30 are crossed with the long CERs, and the inflation expectation in the United States that the market already discounts is added, a key takeaway: Towards 2028, the market is assuming that the real exchange rate would barely rise to levels close to 89. That is, It does not expect a sharp jump but, in any case, a moderate correction that would even remain below what the IMF itself considers an equilibrium level. In this context, it begins to make more sense to reduce exposure to long-term CER bonds and migrate part of the portfolio towards sovereign debt in dollars.
Profit taking begins to prevail
The look of Nazarene Taus, portfolio manager Cocos Capital, is important because it does not propose a total liquidation of exposure to the CER of the middle section, but rather a more balanced risk management in a context in which part of the favorable path has already been consumed.
As he explained, “The boncers 2027 (TZXM7 and TZXD7) They still have arguments to stay in your portfolio if you already have them. Short-term inflation has been showing upward risk, the carry is interesting and, in some cases, there is still a limited margin for real compression.”
The market is not saying that the entire inflation-adjustable curve has lost appeal or that the investor should exit any CER paper without distinguishing duration, real rates or short-term inflation scenario. What is observed, rather, is a change in hierarchy within the curve itself. The securities that can still defend a permanence in the portfolio are those that retain carry, a certain capacity to capture an inflationary surprise in the coming months and a margin, although smaller, to continue compressing real yield.
The problem appears when that equation begins to become too demanding after a fast and significant rally.
That’s why Taus is inclined to start collecting part of that profit accumulated and diversify. In his words, “After gains close to 8% in one monthit seems reasonable to me to start partially taking profits and diversifying the weight risk. In that framework, I see a gradual rotation towards hard dollar sovereignsas AL29 and AL30which adds coverage against a possible exchange rate adjustment and allows capturing attractive returns directly in dollars.”
The X30N6 is a separate story
Where Taus is most categorical is in the analysis of the X30N6, a bond that in recent weeks was used by many investors as a tactical vehicle to capture the acceleration of implicit inflation. As he stated, “The X30N6, instead, seems to have fulfilled its tactical functionsince in the shortest leg of CER real rates They already operate at very demanding levels. The attraction in this case is exclusively to capture the short-term inflationary surprise (March/April above what the break-evens priced), but once these data are incorporated, the upside runs out quickly.”
This comment helps organize the discussion because it clearly separates three different levels: on the one hand, the short CER section, where a good part of the attractiveness has already been conditioned on a specific inflation data and, therefore, offers less margin once that data becomes effective and is absorbed by prices. On the other hand, the 2027 section, where there may still be reasons to hold some position if the portfolio is already assembled and The investor does not need to immediately reduce that exposure.
And finally, the longest section, which is where the rally was most consolidated and where Today it seems more reasonable to start rotating towards dollar bonds.
The rate no longer helps
And, in turn, the current rate level reduces the incentive to position itself in pesos and could function as a catalyst for a recovery in activity, something that in a scenario of electoral and financial improvement could favor a compression of country risk. This combination is what allows us to think about the movement towards AL29, AL30 either AN29 not only as a defensive cover against the currency risk, but also as a bet on capturing value if the market begins to reward a scenario of lower sovereign spread.
Of course, the strategy is not risk-free and the City identifies as the main threat a stagflation scenarioalthough I know that it is understood that current prices already incorporate a part of that potential deterioration.
Despite that, the warning matters because it shows that it is not a blind recommendation or a one-way conviction, but rather a taking a relative position between assets that today seem to be standing in very different places after the performance of recent months.
