Argentina’s Central Bank is to stop foreign banks from buying instruments designed to regulate market liquidity in order to curb what it considers speculation by international investors.
The move, expected to be announced on Wednesday, will bar foreign institutions from buying Lebac and Nobac letters and notes. Their yields rose sharply during the turmoil triggered by the US subprime mortgage crisis. Yesterday’s regular auction of the instruments was the last in which international investors could take part.
A central bank source said the aim was “basically to reinforce the original objective of the Lebacs and Nobacs, which is monetary regulation…We’re not concerned with seducing investors as if this were debt paper”.
But José Luis Espert, an economist, said the measure was more political because foreign investors accounted for only about 10 per cent of the 58bn peso ($18bn) stock of Lebacs and Nobacs.
He said foreign banks “came under the government’s magnifying glass” after heavy dollar buying to cover their positions during the market crisis.
He noted that a list of the biggest buyers was published on the front page of a national newspaper, apparently at the government’s behest, and President Nestor Kirchner said last weekend that ”interest rates have to fall, are going to fall, and we’ll take whatever measures are necessary”.
The government’s National Commission for the Defence of Competition is also investigating whether banks have been raising the cost of borrowing in some instances by acting as a cartel.
”Removing foreign banks from Lebacs and Nobacs responds to this logic,” he said