Argentina boosts its scrutiny of repo loans as peso slides

Argentine authorities are stepping up scrutiny of investor activity in repo loans, the short-term financial instruments that have seen interest rates touch record highs amid a liquidity crunch at the nation’s banks.

The Central Bank and local regulator CNV asked for help analysing the real-time data they receive daily from the country’s two main exchanges, BYMA and A3, on the short-term instruments known locally as cauciones bursátiles, according to people familiar with the matter. The demand, which came last week, includes information on volumes, prices, which brokers are trading and on whose behalf, said the people, asking not to be identified because the information isn’t public. 

It isn’t clear if officials plan to take any action. Such requests aren’t typical under the current government, but were more common during the left-wing administrations of Cristina Fernández de Kirchner and Alberto Fernández. The Central Bank declined to comment.

The Central Bank’s push to contain pressure on the peso and inflation ahead of crucial midterm elections in October has left banks and brokers short of local currency and driven interest rates higher. Guaranteed loan rates soared to record levels, with some overnight peso operations climbing above 100 percent annualised, compared with expected inflation of less than 30 percent a year. 

Even the Treasury was affected, managing to roll over only 61 percent of its maturing debt and validating rates of almost 70 percent in its most recent auction. With another auction set for Wednesday, the Central Bank again increased reserve requirements for commercial lenders on Monday, though it specified that the new bar can be met by purchases of public debt. 

The official peso has now weakened for four consecutive sessions, complicating President Javier Milei’s disinflation strategy ahead of elections in Buenos Aires Province next month that will be a bellweather for national midterms in October. The slide has occurred despite massive interventions, including record futures sales worth billions of dollars.

Economy Minister Luis Caputo said Monday in a post on X that interest rates are high due to political risk and may have “some impact on activity levels in the short term,” but added they will be temporary as the upcoming elections will be “very favourable” for the government.