Bloomberg News

Mexican Peso Bonds Fall as European Optimism Pares Safety Demand

August 21, 2012

Mexico’s peso bonds dropped, pushing yields to their highest level in eight weeks, as optimism European leaders will make progress in tackling Greece’s debt crisis damped refuge demand for the securities.

Yields on peso bonds due in 2024 rose three basis points, or 0.03 percentage point, to 5.62 percent at 4 p.m. in Mexico City, according to data compiled by Bloomberg. The price fell 0.28 centavo to 138.91 centavos per peso. It was the highest closing yield for the bonds since June 25. The peso fell 0.3 percent to 13.1444 per dollar.

Mexico’s local-currency, fixed-rate bonds slid along with U.S. Treasuries on speculation European leaders will make progress on the region’s debt crisis in a series of bilateral meetings between the leaders of euro-area countries this week. Investors have been treating peso debt “like a refuge,” according to Alejandro Padilla, a debt strategist at Grupo Financiero Banorte SAB.

“Now that there’s a little more appetite for risk, we’re seeing assets that have been refuges like Treasuries, Mexican bonds and the dollar losing some of their dynamism,” Padilla said in a phone interview from Mexico City. “The expectation that these talks could be positive helps the market.”

Concessions are possible for Greece as long as Prime Minister Antonis Samaras shows a willingness to meet the main targets set out in his country’s bailout program, Norbert Barthle, a senior lawmaker in German Chancellor Angela Merkel’s party, said today in a phone interview.

Samaras, whose ruling coalition favors an extension of its fiscal adjustment program by two years, is due to meet with Merkel in Berlin on Aug. 24 before traveling to Paris the next day for talks with President Francois Hollande.

Mexico sold all 6 billion pesos ($456 million) of 28-day Cetes and 7 billion pesos of the 91-day securities offered today, the central bank said on its website. Mexico also sold all 9 billion pesos of 182-day bills it auctioned and 9.5 billion pesos of 336-day notes, the bank said.

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

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net


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