The myths and realities of Lebacs

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The myths and realities of Lebacs

Fifth week
May 2017

There is much talk about the Lebacs festival and the fact that it may become a snowball leading to a new debt crisis. Myth or reality?

On the one hand, it is true that the growth of Lebacs (plus reverse repos) was important, given that the stock went from ARS 300 billion by the end of 2015 to ARS 900 billion today. That growth was boosted mainly by two factors: the purchase of dollars to increase reserves and the Lebacs’ own interests.

When it comes to the interest rate, the Lebacs’ annual effective yield for 2016 was 33.6%, which was high in dollars but lower than the inflation rate, which ended 2016 at around 36% (or even more, depending on which index is used). In other words, Lebacs had a negative real interest rate. It would have been more profitable to invest in CER bonds linked to inflation, which almost nobody talks about.