Mexican Peso Bond Yields Fall to Record on Stimulus Speculation

Mexico’s peso bond yields fell to a record low as an unexpected decline in U.S. retail sales stoked speculation the Federal Reserve will take further steps to spur growth in the world’s biggest economy.

The yield on Mexican local-currency bonds due in 2024 dropped three basis points, or 0.03 percentage point, to 5.26 percent at 4 p.m. in Mexico City, according to data compiled by Bloomberg. The bonds’ price increased 0.35 centavo to 143.13 centavos per peso. The peso rose 0.5 percent to 13.2192 per U.S. dollar.

Peso bonds rallied as retail sales in the U.S., the buyer of about 80 percent of Mexican exports, unexpectedly declined for a third straight month in June. The Fed has signaled that a further slowdown would increase support among policy makers for additional steps to lower borrowing costs and spur growth.

“The market is running with the notion that there’s stimulus in the pipeline,” Alejandro Urbina, who manages and advises on about $800 million of emerging-market assets at Silva Capital Management, said by phone from Chicago. “We’ve been getting bad economic data.”

The 0.5 percent drop in U.S. retail sales last month followed a 0.2 percent decline in May, Commerce Department figures showed today in Washington. The decline exceeded the most pessimistic forecast in a Bloomberg News survey that called for a median 0.2 percent increase in sales.

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

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

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