Bloomberg News

Mexican Bond Yields Rise to Highest in Six Weeks on Europe Debt

September 13, 2011

Sept. 13 (Bloomberg) -- Mexico’s peso bond yields climbed to the highest level in six weeks on mounting concern that Europe’s debt crisis will worsen.

The yield on Mexico’s benchmark peso-denominated bond due in 2024 rose two basis points, or 0.02 percentage point, to 6.63 percent at 5 p.m. New York time, according to data from Banco Santander SA. The price of the security fell 0.26 centavo to 129.67 centavos per peso.

German Chancellor Angela Merkel said Greece is taking the right steps to get its next bailout payment, warning against allowing a Greek default because of the risk of contagion for other euro-area countries. Merkel, in a German radio interview broadcast today, said that an “uncontrolled insolvency” would further roil markets spooked by the prospect of a Greek default. Greek Prime Minister George Papandreou will hold a conference call with Merkel and French President Nicolas Sarkozy tomorrow to discuss developments in Greece and the euro area, Papandreou’s Athens office said.

“We’re back in this risk-off trade environment given all the sovereign risk pressures in the euro zone, continued concerns about the growth outlook in the U.S.,” Aryam Vazquez, a New-York based emerging markets economist at Wells Fargo & Co., said in a phone interview. “The markets are really, really uncertain as to what’s going to happen in Europe.”

The peso declined 0.3 percent at 12.8840 per U.S. dollar, from 12.8429 yesterday. It has fallen 4.2 percent this year, the second-worst performer among major Latin American currencies tracked by Bloomberg after Argentina’s peso.

Traders didn’t trigger any of the dollar options available today, the central bank said on its website. The bank has been buying as much as $600 million through the options every month since March 2010 to bolster foreign reserves. They allow the central bank to accumulate dollars, insuring against outflows of capital and limiting the peso’s appreciation.

--With assistance from Tony Czuczka in Berlin. Editors: Marie- France Han, Glenn J. Kalinoski

To contact the reporter on this story: Benjamin Bain in New York at bbain2@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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