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Mexican Peso Gains as Investors Signal Agreement on Greece Bonds

March 8 (Bloomberg) -- Mexico’s peso gained the most in two months as the Greek government’s deadline for the biggest sovereign restructuring in history passed with a majority of investors signaling their readiness to participate in the swap.

The peso climbed 1.5 percent to 12.6785 per U.S. dollar at 4 p.m. in Mexico City, from 12.8732 yesterday. It was the biggest gain since Jan. 3. The peso is up 9.9 percent this year, the most among major currencies tracked by Bloomberg.

The peso gained on speculation Greece would meet a target for investor participation in a debt swap, according to Eduardo Suarez, a senior currency strategist at Scotia Capital Inc. The goal of the exchange is to reduce the 206 billion euros ($273 billion) of privately held Greek debt by 53.5 percent, easing a debt crisis that helped make the peso Latin America’s worst performing currency last year.

The currency gained “on the broad appetite” for higher-yielding assets amid increased confidence Greece would secure the participation needed for the swap, Suarez said by phone from Toronto. “It reduces the uncertainty of an unforeseen outcome. We know kind of what’s going to happen. If there were no voluntary swap, then uncertainty once again rises.”

Greece’s government got about 85 percent of bondholders to tender their holdings of the country’s debt for new securities, a Greek banking official said. Preliminary indications after the deadline for the swap expired today showed that as much as 155 billion euros of the 177 billion-euro Greek-law bonds were offered, according to the official in Athens, who declined to be identified.

Debt Swap

Greek Prime Minister Lucas Papademos told his Cabinet ministers that Greece had made “an appropriate framework with significant incentives” for bondholders.

Mexico’s consumer prices rose 0.2 percent in February from the previous month, the national statistics agency said today on its website. Economists projected that prices increased 0.30 percent, according to the median estimate in a Bloomberg survey of 19 analysts. The annual inflation rate in February fell to 3.87 percent from 4.05 percent a month earlier.

Slower inflation benefits the peso because it boosts speculation that central bank policy makers won’t adjust the country’s 4.5 percent benchmark rate, making fixed-rate bonds attractive to investors, Suarez said.

The yield on the country’s peso-denominated debt due in 2024, known as Mbonos, fell seven basis points, or 0.07 percentage point, to 6.36 percent, according to data compiled by Bloomberg. The price rose 0.75 centavo to 131.77 centavos per peso.

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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