Mexico Peso Bond Yields Rise Most in Three Months on CPI Concern

Mexico’s peso bonds fell, pushing yields up by the most in three months, as speculation inflation quickened last month led investors to demand higher returns on fixed-rate securities.

The yield on Mexico’s 10 percent bond due in 2024 rose 19 basis points, or 0.19 percentage point, to 7.15 percent at 5 p.m. New York time, according to Banco Santander SA. That’s the biggest increase since Aug. 26. The price dropped 1.93 centavos to 125.18 centavos per peso.

Annual inflation quickened to 4.33 percent in November from 4.02 percent in October, according to the median estimate of 12 economists surveyed by Bloomberg. The central bank is slated to publish the monthly inflation report on Dec. 9.

“There’s evidence November inflation may be higher than initially expected and that’s making the market nervous,” said Alfredo Coutino, Latin America director at Moody’s Economy.com Inc. in West Chester, Pennsylvania.

Mexico’s consumer prices rose 0.68 percent in the first half of November, above the median forecast for a 0.60 percent increase among analysts surveyed by Bloomberg.

Central bank Governor Agustin Carstens said Nov. 10 that the country’s inflation outlook is evolving “much better than expected,” while medium and long-term expectations for consumer prices remain “quite above” the bank’s 3 percent target.

Banco de Mexico will probably leave the benchmark interest rate unchanged at 4.5 percent through 2011 as policy makers seek to boost growth amid concern over the U.S. economy and the euro region’s sovereign-debt crisis, according to Coutino.

The U.S. purchases about 80 percent of Mexico’s exports.

“Mexico is one of the most affected because of its dependency on the U.S. growth cycle, so I doubt they’d dare to lift rates next year,” Coutino said.

The peso erased an earlier gain, weakening 1 percent to 12.4941 per dollar, from 12.3675 yesterday.

Traders didn’t trigger any of the $600 million in dollar options available today. The central bank has been auctioning the options monthly, allowing it to purchase dollars to boost foreign reserves after the peso reached a record low last year.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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