Bloomberg News

Mexican CPI-Linked Bonds Advance as Inflation Above Target

July 09, 2012

Mexican bonds tied to consumer prices advanced for a fifth day after annual inflation last month breached the ceiling of the central bank’s target range.

Yields on inflation-linked bonds, known as Udibonos, due in December 2013 fell three basis points, 0.03 percentage point, to 0.1 percent at 4 p.m. in Mexico City, according to data compiled by Bloomberg. The peso advanced 0.3 percent to 13.3552 per U.S. dollar, boosting its gain this year to 4.3 percent, the biggest advance in 2012 among major currencies tracked by Bloomberg.

Annual inflation accelerated to 4.34 percent in June from 3.85 percent the month before, the national statistics institute said on its website today. The rate was the highest since December 2010. Mexican policy makers, who target annual inflation between 2 percent and 4 percent, were unanimous in their decision to keep the benchmark interest rate unchanged last month.

“The reaction in the Udibonos is to be expected when you have a higher inflation number like this,” Aryam Vazquez, an economist for global emerging markets at Wells Fargo & Co., said by phone from Harrington Park, New Jersey.

Central bank Governor Agustin Carstens predicted in an interview on July 4 that inflation will slow this quarter to within policy makers’ target range.

The yield on Mexican fixed-rate local-currency bonds due in 2024 were little changed at 5.35 percent. The price fell 0.02 centavo to 142.15 centavos per peso.

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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