Bloomberg News

Mexican Bonds Rally as Federal Reserve Moves to Spur Growth

June 20, 2012

Mexican bonds headed for the longest winning streak since January after the Federal Reserve said it would expand a program to promote U.S. growth.

The yield on Mexican local-currency bonds due in 2024 fell four basis points, or 0.04 percentage point, to 5.76 percent at 12:19 p.m. in Mexico City, the lowest level on a closing basis since the securities were issued in January 2005. The price increased 0.42 centavo to 137.70 centavos per peso. Yields are headed to their fifth straight daily decline for the first time since the period ended Jan. 20.

The Fed said today it would expand Operation Twist, a program to replace short-term bonds with longer-term debt, by $267 billion through the end of the year in a bid to “put downward pressure on longer-term interest rates.” They left unchanged their view that economic conditions will probably warrant keeping interest rates “exceptionally low” at least through late 2014.

“Demand in general for Mexican debt is going to remain strong,” Aryam Vazquez, an economist for global emerging markets at Wells Fargo & Co., said by phone from New York. “The fact that these are higher yielding bonds in a low risk country solidifies demand.”

Mexico’s central bank kept its benchmark interest rate unchanged for the 27th straight meeting this month at a record low 4.5 percent.

“It obviously is very attractive when you look at it relative to markets like the U.S.,” Vivienne Taberer, a portfolio manager with Investec Asset Management, said by phone from London, before the Fed released its statement.

The peso increased 0.2 percent to 13.6629 per dollar.

To contact the reporter on this story: Ben Bain in Mexico City at bbain2@bloomberg.net

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


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