Bloomberg News

Mexico CPI-Linked Debt Yields Rise on Lower Inflation Forecasts

May 22, 2012

Yields on Mexican bonds linked to inflation rose the most in three weeks after a survey showed economists are paring estimates for consumer price increases.

Yields on the bonds due in 2013, known as Udibonos, climbed seven basis points, or 0.07 percentage point, to 1.11 percent at 4 p.m. in Mexico City, according to data compiled by Bloomberg. It was the biggest increase since April 27. The peso depreciated 1.5 percent to 13.9031 per dollar, paring its rally this year to 0.2 percent.

Mexican inflation will end 2012 at 3.69 percent, down from the previous forecast of 3.73 percent, according to the median projection of analysts in a biweekly survey released yesterday by Citigroup Inc.’s Banamex unit.

The central bank last week raised its growth forecast for this year and said the risk to inflation has diminished, while expressing optimism the economy can sustain its current growth.

“The outlook is one of contained inflation,” Enrique Alvarez, the New York-based head of Latin America fixed-income research at IdeaGlobal, said by phone. “At least at this point you don’t have a large quotient of indicators that say that you’re going to have a problem with inflation ahead.”

The central bank kept the key interest rate unchanged at 4.5 percent for a 26th consecutive meeting last month. Mexico’s annual inflation rate fell to a six-month low of 3.41 percent in April from 3.73 percent in the previous month, the national statistics agency said May 9.

To contact the reporter 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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