The peso closed the session with a depreciation of 1.56% or 37.5 cents, trading around 24.37 pesos per dollar, due to an increase in the perception of risk in global financial markets, after negative economic indicators were published in the United States and before a downward correction in oil prices in the commodity market.

In the morning, the ADP employment survey showed the loss of 20 million 236 thousand jobs in the United States during April, so on Friday a historical destruction of jobs in a month is likely to be confirmed, leading to the unemployment rate above 15 percent.

Capital markets in that country held back their two-day gains, posting losses. In the raw materials market, the price of the WTI fell 2.04%, trading at $ 24.06 per barrel, being its first drop since Tuesday, April 28.

In the session, the Global Risk Perception Base Indicator (IBP) was located at 587 units, which means perception of high risk.

It is important to point out that, in the last three weeks, the exchange rate has consistently faced difficulties to settle below the support of 23.80 pesos per dollar and above the resistance of 25 pesos per dollar.

Yesterday the exchange rate momentarily touched the support of 23.80 pesos, which increased demand for dollars in the short term, contributing to today’s upward movement.

The peso and the bonds

On the other hand, the Treasury Department (DT) in the United States announced this morning the introduction of a 20-year bond, which had not been issued since 1986. Until now, most of the country’s debt had been financed with short-term bonds, expanding the market for T-bills.

However, now the Treasury has indicated that it seeks to transfer the new debt acquired by the Covid-19 pandemic to longer-term bonds. The initial placement of this bond will be $ 20 billion and the auction will take place on May 20.

The DT expects that additional auctions of this bond will be held in June and July worth 17 billion each, so it is estimated that this bond will raise an additional $ 54 billion during the quarter.

Although the 20-year bond had already been announced in January, the initial placement had been suggested to be around 13 billion, so the amount announced in the morning was surprising.

Likewise, it was indicated that, in the next auctions, a record of 96 billion dollars will be placed, which represents an increase of 14.3% compared to the average placement that had been maintained during the last 5 quarters.

Of the total, 57 billion are to pay securities with an expiration date of May 15, 2020. The securities will be offered at 3 years (42 billion), 10 years (32 billion) and 30 years (22 billion).

GDP

These issues are part of a program to issue debt during the second quarter for 2.99 trillion dollars, which was announced by the Treasury Department at the beginning of the week.

With this, the Congressional Budget Office estimates that the federal government debt in the hands of the public could be close to 101% of GDP at the end of the fiscal year (September 2020), up from 79% at the end of the 2019 fiscal year.

In the session, the exchange rate touched a minimum of 23.8729 pesos and a maximum of 24.3915 pesos. The euro-peso reached a minimum of 25.8581 and a maximum of 26.3790 pesos per euro in the interbank prices for sale. For its part, the euro touched a minimum of 1.0782 and a maximum of 1.0846 dollars per euro.

At the close, the interbank quotations for sale were located at 24.3700 pesos per dollar, 1.2340 dollars per pound and at 1.0793 dollars per euro.

Gabriela Siller; PhD

Director of Economic-Financial Analysis.

Banco BASE