(Corrects peso level in second paragraph.)
Mexico’s peso bonds dropped, pushing yields to a one-month high, as the European Central Bank won backing from Germany for its bond-buying plan, reducing demand for a refuge in the Latin American nation’s debt.
The yield on Mexican local-currency bonds due in 2024 rose one basis point, or 0.01 percentage point, to 5.43 percent at 4 p.m. in Mexico City, according to data compiled by Bloomberg. It was the highest level on a closing basis since July 2. The price declined 0.12 centavo to 141.05 centavos per peso. The peso fell 0.5 percent to 13.1985 per U.S. dollar.
Local currency Mexican debt slumped on speculation the ECB will buy sovereign bonds to help bring down borrowing costs in Spain and Italy. The deputy spokesman for German Chancellor Angela Merkel said her government backed an ECB bond-buying plan announced last week. Mexican fixed-rate bonds fell on Aug. 3 as U.S. payrolls increased last month more than expected.
“Mexican bonds have been seen as a certain refuge from adversity,” Gerardo Welsh, a bond trader at Banco Base SA, said by phone from San Pedro Garza Garcia, Mexico. “We saw the employment figures on Friday above expectations and in Europe the possibility of buying back sovereign bonds. That helps calm things down a bit.”
While yields on the 2024 bonds have risen nine basis points since Aug. 2, they’re still down 123 basis points in 2012.
Investors including Bill Gross, who runs the world’s largest mutual fund at Pacific Investment Management Co., have said they were buying the securities as a higher-yielding, investment-grade alternative to safe-haven bonds from developed nations during the European debt crisis.
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