Dec. 4 (Bloomberg) -- Mexico’s local bonds rose as central banks around the world cut lending rates to spur economic growth, buoying demand for higher-yielding assets.

“We saw several global banks reducing rates, helping to push down yields here,” said Agustin Villarreal, a bond trader at Invex Casa de Bolsa SA in Mexico City. It suggests “Banco de Mexico will begin to aggressively lower rates” next year.

The yield on Mexico’s 10 percent bond due in December 2024, the country’s most-traded security, decreased six basis points, or 0.06 percentage point, to 8.89 percent at 5 p.m. New York time. The bond’s price rose 0.56 centavo to 109.4 centavos per peso, according to Banco Santander SA.

The European Central Bank cut its main refinancing rate today by the most in its 10-year history, to 2.5 percent, following rate reductions in the U.K., Sweden, Denmark and New Zealand. Traders stepped up bets the Federal Reserve will cut its target rate to 0.25 percent from 1 percent on Dec. 16.

Mexico’s central bank kept its overnight target at 8.25 percent on Nov. 28 for a third month after inflation surged to a seven-year high in the first half of November. In its statement, the bank said the risk of slower growth in Mexico increased as the global financial crisis intensified.

Villarreal recommended buying Mexico’s 2 1/2-year securities on bets the central bank will reduce its lending target to 7 percent by the end of next year. Mexico’s 8.5 percent bonds due in June 2011 fell two basis points to 8.31 percent today.

The peso was little changed today, falling 0.1 percent to 13.6124 per U.S. dollar, from 13.6007 yesterday.

To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net

Last Updated: December 4, 2008 17:19 EST