Mexico Local Currency Bonds Slump on Supply Increase; Peso Slips

Mexican peso bonds maturing from 2017 to 2024 slumped a day after the government issued 20 billion pesos ($1.5 billion) of the securities in a swap to extend debt maturities.

Yields on the bonds maturing in 2024 increased four basis points, or 0.04 percentage point, to 6.02 percent at 12:19 p.m. in Mexico City, according to data compiled by Bloomberg. That is the highest on a closing basis since Sept. 17. The peso weakened 0.4 percent to 13.0557 per dollar.

The bonds extended declines as the U.S. budget impasse damped demand for emerging-market assets, according to Siobhan Morden, the head of Latin American strategy at Jefferies Group LLC in New York.

The “curve extension comes at an inopportune moment against weaker sentiment,” Morden said in an e-mailed response to questions.

The government bought back yesterday 21.3 billion pesos of shorter-term securities maturing from 2014 to 2016 under the debt exchange.

A statement today from the government disclosing plans to increase bond offerings next quarter drove some investors to sell, Alejandro Padilla, a strategist at Grupo Financiero Banorte SAB, said in an e-mailed response to questions.

To contact the reporters on this story: Ben Bain in Mexico City at bbain2@bloomberg.net; Nacha Cattan in Mexico City at ncattan@bloomberg.net

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

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