Mexico Yields Reach Highest Since 2011 on Fed; Peso Advances

Mexico’s peso bonds fell for a third straight month, pushing yields to the highest level since December 2011, as the U.S. central bank cut stimulus that had benefited emerging-market assets.

Yields on notes due in 2023 rose 16 basis points, or 0.16 percentage point, in January to 6.61 percent as of 11:34 a.m. in Mexico City, according to data compiled by Bloomberg. The peso gained less than 0.1 percent to 13.3518 per dollar today, paring its monthly drop to 2.4 percent.

Mexico bonds followed emerging-market assets lower as the Federal Reserve reduced stimulus in the U.S., the nation’s top export market, and Turkey raised borrowing costs amid a run on its currency. Mexico’s central bank kept interest rates unchanged today at a record low 3.5 percent, while saying policy makers would monitor rising costs for some products spurred by a tax increase.

Bonds have been hurt by “the strong sense of risk aversion in emerging markets, which has generated a significant increase in risk premiums in several assets,” Alejandro Padilla, a strategist at Grupo Financiero Banorte SAB, wrote in an e-mailed report today.

To contact the reporter on this story: Jonathan Levin in Mexico City at jlevin20@bloomberg.net

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

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