Mexico’s peso bonds dropped, pushing yields to their highest level since June, as optimism for progress on Europe’s debt crisis and bets on more Federal Reserve stimulus damped demand for assets seen as a refuge.
Yields on Mexican peso bonds due in 2024 rose for a fifth day, increasing four basis points, or 0.04 percentage point, to 5.7 percent at 4 p.m. in Mexico City, according to data compiled by Bloomberg. The price fell 0.43 centavo to 137.84 centavos per peso. The yield was the highest since June 20. The peso slid 0.2 percent to 13.0143 per dollar.
Mexican debt dropped along with U.S. Treasuries after Germany’s top constitutional court rejected efforts to block a permanent euro-area rescue. The securities also slid on speculation the Federal Reserve will announce a third round of bond purchases tomorrow, according to Kenneth Lam, a Latin America currency and rates strategist at Citigroup Inc.
“Mainly it’s because of Treasuries,” Lam said by phone from New York. “We’ve seen yields backing up because of just in general the positive risk sentiment.”
The 60-day correlation coefficient between 10-year Mexican government bonds and similar-maturity Treasuries increased to 0.33 today, the highest level in almost a year. A reading of 1 means the two securities move in lockstep while -1 indicates they move in opposite directions.
The Fed will probably announce a third round of bond purchases tomorrow, according to almost two-thirds of economists in a Bloomberg survey, while also extending the duration of its zero-interest-rate policy into 2015.
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