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Mexican Peso Bond Yields Hold Near Lowest Level in Three Weeks

Mexican peso bond yields held near a three-week low as the central bank’s record level of international reserves helped bolster confidence in Latin America’s second-biggest economy.

The yield on Mexico’s peso-denominated debt due in 2024 was little changed at 6.43 percent at 11:12 a.m. in Mexico City, according to data compiled by Bloomberg. The yield was 6.41 percent on March 13. The bonds’ price today dropped 0.01 centavo to 130.91 centavos per peso. The peso traded little changed at 12.7480 per dollar.

Mexico’s foreign reserves rose to $150.3 billion in the week ended March 30, the central bank reported today. Foreigners are boosting holdings of Mexican fixed-rate debt in part because Mexico’s has “a great fundamental, stable story behind it,” said Nick Chamie, the head of emerging markets at RBC Capital Markets in Toronto.

“Inflows into Mexico’s local bond market remain quite strong from foreigners,” Chamie said by phone. “That bid for Mexican fixed income is helping to drive yields lower.”

International investors held 43.8 percent of fixed-rate government debt on March 23, up from 31.8 percent a year earlier, according to the most recent data from the central bank.

The peso touched 12.6980, the strongest level on an intraday basis since March 28. It has gained 9.5 percent in 2012, the most among the most-traded currencies tracked by Bloomberg.

Orders to U.S. factories rose 1.3 percent in February after a revised 1.1 percent decline in the prior month, figures from the Commerce Department showed today in Washington. Mexico sends about 80 percent of its exports to the U.S.

“It’s the same story as always about the correlation between the U.S. and Mexico,” Ramon Cordova, a currency trader at Banco Base SA in San Pedro Garza Garcia, Mexico, said by phone. Trading in the peso is going to be “thin” this week before the Easter holiday, he said.

To contact the reporter on this story: Ben Bain in New York at bbain2@bloomberg.net

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

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