Mexican Bonds Decline Most in 18 Months on U.S. Economic Recovery Concern

Mexico’s peso bonds fell the most in 18 months on concern the U.S. economic recovery may stall, reducing appetite for the nation’s debt.

The yield on Mexico’s 10 percent bonds due in 2024 rose 20 basis points, or 0.2 percentage point, to 6.65 percent at 5 p.m. New York time. The bonds fell 2.20 centavos to 130.77 centavos per peso, the biggest drop since March 2, 2009.

“It has to do with risk aversion from the bad data that’s coming out of the U.S., the real estate market,” said Gerardo Welsh, a trader with Base Internacional Casa de Bolsa SA in Monterrey, Mexico. “Nobody is interested in buying.”

Purchases of existing U.S. homes plunged 27.2 percent to a 3.83 million annual rate, according to figures from the National Association of Realtors reported Aug. 24. The U.S. buys 80 percent of Mexico’s exports.

The bonds have fallen for four straight days, the longest streak in three months.

Local data is also curbing expectations for Mexico’s economic recovery, said Aryam Vazquez, an emerging-markets economist at Wells Fargo & Co. in New York. Mexican retail sales rose 1.5 percent in June from the same month a year earlier, the country’s statistics institute said Aug. 23. Economists had forecast sales would increase 4.3 percent, according to the median estimate of 14 analysts surveyed by Bloomberg.

The peso fell 0.7 percent to 13.0693 per U.S. dollar, from 12.9830 yesterday.

Traders didn’t trigger any of the dollar options available today, the central bank said on its website. So far this month, $447 million in options have been exercised. The central bank has been auctioning $600 million in dollar options monthly, allowing it to purchase dollars to boost foreign reserves after the peso dropped to a record low last year.

To contact the reporter on this story: Jonathan J. Levin in Mexico City at jlevin20@bloomberg.net

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