Bloomberg News

Mexico Bond Yields Fall Before Central Bank; Peso Little Changed

March 07, 2013

Yields on Mexico’s shorter-term bonds fell as speculation mounted that policy makers will reduce benchmark borrowing costs as soon as tomorrow after holding them at 4.5 percent since July 2009.

Yields on peso-denominated debt due in December 2013 dropped five basis points, or 0.05 percentage point, to 4.18 percent at 8:30 a.m. in Mexico City, according to data compiled by Bloomberg. Mexico’s currency was little changed at 12.7814 per U.S. dollar.

The yields on interbank futures contracts due in March dropped 0.35 percentage point since before the last rate decision in January to 4.51 percent through yesterday, showing investors have been boosting bets for a rate cut to be announced tomorrow, according to data compiled by Bloomberg.

“It’s part of what we’ve seen in recent weeks with the outlook that the Bank of Mexico could cut rates,” Rafael Camarena, an economist at Grupo Financiero Santander Mexico SAB who is forecasting a 50 basis point reduction tomorrow, said in a phone interview from Mexico City. “It’s the outlook that if the Banco de Mexico cuts the reference rate for the market, there’s an expectation for what will happen to bonds across the curve.”

Inflation accelerated to 3.55 percent last month, the national statistics agency reported today. Cost-of-living increases slowed for four straight months through January.

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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