Mexico Peso Bond Yields Drop to Record on Federal Reserve Purchase Concern
Mexico’s peso bonds rose, pushing yields to a record low, on concern the Federal Reserve may increase purchases of government securities because of the weakening U.S. recovery.
The yield on Mexico’s 10 percent bond due in 2024 fell three basis points, or 0.03 percentage point, to 6.56 percent at 10:17 a.m. New York time, according to Banco Santander SA, the lowest level since the security was issued in 2005. The price rose 0.34 centavo to 131.85 centavos per peso. The bonds have risen for eight days, the longest streak since June 7.
“Given what’s happening in the world, and with Treasuries at these critical lows, the peso bonds will continue to rally,” said Ramon Cordova, a currency strategist at Base Internacional Casa de Bolsa SA in Monterrey, Mexico. The yield may drop to 6 percent by the end of the year, he said.
The Fed said it plans to buy Treasuries due from August 2016 to August 2020 tomorrow, after buying $2.551 billion of securities yesterday.
The peso dropped 0.2 percent to 12.6184 per dollar, from 12.5960 yesterday. The decline pared the currency’s gain this year against the dollar to 3.7 percent, the third-best performer among the 16 major currencies tracked by Bloomberg, after Japan’s yen and Singapore’s dollar.
To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net
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