Oct. 19 (Bloomberg) -- Mexico’s peso bonds rallied as investor demand for the higher-yielding securities overshadowed concern about Europe’s debt crisis before a meeting of the euro region’s leaders.

The yield on Mexico’s benchmark peso-denominated bonds due in 2024 fell one basis point, or 0.01 percentage point, to 6.51 percent at the close of trading in Mexico City, according to data compiled by Bloomberg. The price rose 0.14 centavo to 130.73 centavos per peso. Yields on Mexico’s bonds have dropped 10 of the past 11 days.

Euro-area leaders assembled in Frankfurt seeking to narrow divisions before an Oct. 23 summit to confront the region’s sovereign debt crisis. As the European “headlines have turned very convoluted” the interest-rate differential between Mexico and developed markets continues to lure investors to the Mexican notes, according to Enrique Alvarez, the New York-based head of Latin America fixed-income research at IdeaGlobal. Mexico’s central bank kept its benchmark interest rate unchanged at 4.5 percent on Oct. 14, compared with near-zero rates in the U.S., Europe and Japan.

The bonds’ rally is “a function of what you continue to see externally, which is a number of conflicting stories on the resolution of the sovereign crisis,” Alvarez said by phone. “On the U.S. side, as usual, you see a sort of a very mixed bag on the economy.”

The peso weakened 0.6 percent to 13.4595 per U.S. dollar, from 13.3809 yesterday. The currency has dropped 8.3 percent this year.

Traders didn’t trigger any of the dollar options available today, Mexico’s central bank said on its website. The central bank has been buying as much as $600 million through the options every month since March 2010 to bolster foreign reserves.

--Editors: Brendan Walsh, Richard Richtmyer

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