Bloomberg News

Mexico Peso Bonds Slump for Fourth Day on European Debt Concern

November 25, 2011

Nov. 24 (Bloomberg) -- Mexico’s benchmark peso bonds slumped for a fourth day as Europe’s debt crisis stoked concern that global economic growth will slow and damped investor demand for assets from Latin America’s second-biggest economy.

The yield on Mexico’s benchmark peso-denominated bond due in 2024 increased for a fourth day, rising six basis points, or 0.06 percentage point, to 6.93 percent at the close of trading in Mexico City. The price for the security declined 0.64 centavos to 126.24 centavos per peso.

German Chancellor Angela Merkel today again ruled out joint euro-area borrowing and an expanded role for the European Central Bank in fighting the region’s debt crisis which has sapped demand for Mexico’s higher-yielding assets. Euro bonds are “not needed and not appropriate,” Merkel said at a press conference with Italian Prime Minister Mario Monti and French President Nicolas Sarkozy in Strasbourg, France.

The recent slump in Mexican bonds “is just reflecting risk aversion,” Alonso Cervera, an economist at Credit Suisse Group AG, said in a telephone interview from Mexico City. “It’s just a reflection of developments in Europe and lack of liquidity and depth in the market. The big one is Merkel and her comments.”

Markets in the U.S. are closed today for the Thanksgiving holiday.

Mexico’s consumer prices rose 0.97 percent in the first half of November, the national statistics agency said today on its website. Economists expected prices to climb 0.74 percent, according to the median of 16 estimates in a Bloomberg survey.

The peso declined 0.2 percent to 14.2050 per U.S. dollar, from 14.1788 yesterday. The currency, which has declined 13 percent this year, touched the lowest level since March 2009.

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 Nacha Cattan in Mexico City. Editors: Brendan Walsh, David Papadopoulos

To contact the reporters on this story: Ben 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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