Mexican Bond Yields Decline to Record Low; Peso Little Changed

Mexico’s bond yields tumbled to a record low amid mounting speculation that the central bank will reduce the country’s target interest rate this week.

Yields on benchmark peso bonds due in 2024 fell three basis points, or 0.03 percentage point, to 5.02 percent at 7:54 a.m. in Mexico City, according to data compiled by Bloomberg. A close at that level would be the lowest since the securities were first issued in 2005. The price rose 0.32 centavo to 144.21 centavos per peso. The peso gained less than 0.1 percent to 12.7402 per dollar.

Interbank futures contracts show that traders are betting central bank board members led by Governor Agustin Carstens will cut the 4.5 percent benchmark rate at the conclusion of their policy meeting on March 8. Nineteen of 20 economists predicted lower borrowing costs this year in a bi-weekly survey by Citigroup Inc.’s local Banamex unit released Feb. 20. The bank is scheduled to release its latest survey results today.

“We’re again at record lows,” Jose Carreno, a bond trader at Banco Base SA, said in a phone interview from San Pedro Garza Garcia, Mexico. Traders speculating about a reduction “are trying to get a get ahead a bit of the movement that could happen with the cut. They’re trying to anticipate it.”

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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