The BCRA settled in advance reverse repo transactions with seven international banks for USD5 billion at the end of January 2016, and arranged new transactions with two international banks for USD1 billion at a USD one-month LIBOR rate plus 2.25%. Thus, it succeeded in reducing its reverse repos by USD4 billion.
Since then, the financial context of the Argentine Republic has improved significantly leading to a hike in the price of its sovereign bonds, a drop in interest rates in the entire sovereign yield curve and, therefore, a decline in the cost of attracting foreign capital. In turn, the BCRA’s balance sheet has improved considerably since December 17, 2015 with the purchased of over USD8 billion. Thus, it strengthened its position in International Reserves, thereby reducing its additional liquidity needs in US dollars to face potential external shocks.
As a result of these improvements, the BCRA has decided to reduce the stock of its reverse repos by settling transactions in advance and arranging new ones with Banco Santander and Deutsche Bank AG for USD1 billion. This has enabled to reduce costs dramatically to a USD one-month LIBOR rate plus 2.25 %, with net savings around USD89 million.
The BCRA has succeeded in arranging the new reverse repos with international banks at the lowest rate in its history.
In addition, it has made use of one of the mechanisms offered by the BIS to manage its balance sheet more efficiently and at a lower cost, thus recording an additional income of USD2.5 billion today, and additional maneuver margin in the coming months.
