STRATEGY
In the short term, for moderate risk profile protfolios with an overweight in Argentine securities, we suggest to continue reducing exposure to Argentine risk, while for more aggressive portfolios looking for a potential rebound in local securities prices, we suggest to maintain exposure to longer bonds with lowest parities.
As for assets in pesos, we favor Lecaps, with very attractive yields for all the curve.
Regarding dollar bonds, our suggestion continues to be to maintain position in dollar denominated Bills maturing in 2019. For more aggressive portfolios, Par bonds are attractive due to its favorable parity, wich reduces potential loss in a stress event.
Outlook
The US economy continues to show a mixed scenario, with high job creation and growing consumption, and the greatest risks come from the slowdown in global demand and the persistence of the trade conflict with China.
In this sense, failed negotiations between the US and China resulted in higher tariffs on Chinese imports and a devaluation of the yen that spread to all currencies. Paradoxically, the search for safe havens raised Treasury prices, with the consequent drop in rates. The 10-year bond yield closed at 1.74%, one of the last three years’ lowest levels.
Therefore, the perception that the trade conflict is far from being resolved, and that the negative effect on the global economy and on the US increased, has raised expectations that the Fed will inevitably lower rates again in the near future. A new cut is expected at the September meeting, and possibly another one at the October meeting.
Highlights
- Performance: In terms of pesos, Argy bonds closed -15.31% on average last week, according to the IAMC Bond index.
- Global rates: The UST 10-year yield closed at 1.55% today.