BCRA Implements a System to Reduce the Volatility of Treasury Securities

In order to reduce price volatility of Treasury securities, the BCRA will offer financial institutions put options on Argentine Government Securities awarded as from July 2022 and maturing before December 31, 2023.

A put option is a financial derivative instrument—not a guarantee—that gives the option buyer the right, but not the obligation, to sell an underlying asset at a predetermined price within a specific time frame or at any time before the expiration date. The issuer of the option has the obligation to purchase the underlying asset under the same conditions aforementioned.

The strike price will be determined by the maximum rate between the asset’s closing value on the business day before settlement and the weighted average APR, plus a spread. Hence, the financial institution that holds the put option must pay a premium.

Financial institutions may exercise put option contracts on Argentine Government Securities awarded as from July 2022 at any time until their expiration date, that is, up to 15 days before the collateral matures. The securities that can be used as underlying assets are Argentine Government Securities awarded as from July 2022 and maturing before December 31, 2023.

In addition, the BCRA will continue participating in the secondary market to reduce the volatility of Treasury securities. For debt securities awarded as from July 2022, it will offer purchase positions at a price similar to the value of the primary auction plus a maximum spread of 2%.

July 12, 2022