Bloomberg News

Mexican Bond Yields Touch Record Low on Central Bank Speculation

July 03, 2012

Mexico’s peso bond yields touched a record low on speculation global policy makers will coordinate efforts to bolster economic growth, adding to appetite for higher-yielding assets.

The yield on Mexican local-currency bonds due in 2024 dropped five basis points, or 0.05 percentage point, to a record low 5.43 percent at 4 p.m. in Mexico City, according to data compiled by Bloomberg on a closing basis. The price increased 0.51 centavo to 141.36 centavos per peso. The currency rose 0.1 percent to 13.3311 per U.S. dollar.

“Whenever there is a surge in risk appetite, investors will try to capitalize and Mexico is one of the targets,” Italo Lombardi, an economist at Standard Chartered Bank, said by phone from New York. “This is the tone today in the markets.”

Local-currency Mexican bonds rallied last month after the U.S. Federal Reserve extended a program to cap longer-term interest rates.

Economists predict the European Central Bank will cut borrowing costs on July 5 to help contain the sovereign-debt crisis. China may cut lenders’ reserve requirements to boost liquidity in the banking system, according to commentary on the front page of today’s China Securities Journal, which is published by state-run Xinhua News Agency.

Mexico’s currency posted its best weekly performance since December in the five days through June 29 before the July 1 presidential election.

Pena Nieto Pledges

Enrique Pena Nieto of the Institutional Revolutionary Party, who has claimed victory, pledged during the campaign to support legislation making it easier to hire and fire workers, drawing more people into the formal economy. He also said he favors expanding private investment in the oil industry, loosening state-controlled Petroleos Mexicanos’s grip.

His campaign estimated yesterday that the PRI-led alliance would lack a majority in the lower house of congress, making it harder for legislative changes.

Andres Manuel Lopez Obrador, the Democratic Revolution Party candidate, said today in a televised statement that a full recount is needed for the July 1 national election because the contest wasn’t “free or clean.”

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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