Bloomberg News

Mexican Peso Bonds Fall as U.S. Manufacturing Posts Growth

December 01, 2011

Dec. 1 (Bloomberg) -- Mexico’s peso bonds declined as a pickup in U.S. manufacturing fueled speculation the Latin American country’s exports will rise, sparking growth and limiting the room that policy makers have to cut interest rates.

The yield on peso-denominated bonds due in 2013 rose two basis points, or 0.02 percentage point, to 4.68 percent at 1:51 p.m. in Mexico City. The price on the securities fell 0.07 centavo to 106.48 centavos per peso. The yield on benchmark note due in 2024 rose six basis points to 6.54 percent.

The Institute for Supply Management’s U.S. factory index increased to 52.7 in November, the highest in five months, the Tempe, Arizona-based group said today. The U.S. is the destination for about 80 percent of Mexico’s exports.

“U.S. data has been surprising on the upside, and so has Mexico,” Eduardo Suarez, a Latin America currency strategist at Scotia Capital Inc., said in a telephone interview.

Mexico’s central bank is scheduled to make an announcement on rates tomorrow after concluding a policy meeting. Twenty-one of 22 economists surveyed by Bloomberg predict the bank will hold the rate at a record low 4.5 percent.

Latin America’s second-biggest economy expanded 4.5 percent in the third quarter from a year earlier, topping the median estimate of 3.9 percent from 16 analysts surveyed by Bloomberg. The unemployment rate fell to a four-month-low of 5 percent in October, while consumer prices rose 0.97 percent in the first half of November, more than the 0.74 percent increase predicted by 16 economists in a Bloomberg survey.

Dollar Auctions

The peso was little changed, gaining 0.1 percent to 13.6070 per dollar, from 13.6251 yesterday. It’s surged 4.6 percent this week. Mexico’s currency-exchange commission said Nov. 29 that the central bank will auction $400 million daily at a peso exchange rate at least 2 percent weaker than the previous day’s level, providing support for the currency when it tumbles.

Policy makers dusted off a mechanism they last used 19 months ago to stem declines in the peso following the collapse of Lehman Brothers Holdings Inc. The peso’s rally this week trimmed its decline in 2011 to 9.2 percent.

--Editors: Marie-France Han, David Papadopoulos

To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net

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


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