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Mexico Swap Rates Fall After Central Bank Statement; Peso Rises

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Nov. 30 (Bloomberg) -- Mexican swap rates fell to a two-week low after the central bank damped speculation that it may boost borrowing costs to contain inflation.

One-year swap rates dropped five basis points, or 0.05 percentage point, to 4.91 percent today, the lowest closing level since Nov. 16, according to data from JPMorgan Chase & Co. The peso depreciated 0.2 percent to 12.9667 per U.S. dollar, paring its monthly rally to 1 percent.

The central bank left its target lending rate at a record low 4.5 percent, saying in a statement that it may still raise borrowing costs if inflation doesn’t ease while eliminating an assertion that it would do so “soon.”

Policy makers sounded “less hawkish,” Pedro Tuesta, a senior Latin America economist at 4Cast Inc., said in a phone interview from Washington. The falling swap rates show “reduced bets” on increased borrowing costs.

The central bank bank’s board held the overnight lending rate at an all-time low for a 31st consecutive meeting, as the economy grew in the third quarter at the slowest pace in more than a year and inflation slowed toward policy makers’ target. Twenty-one out of 22 analysts surveyed by Bloomberg expected the bank to stay on hold. One economist forecast a quarter-percentage point increase.

Yields on peso bonds due in 2024 fell seven basis points, or 0.07 percentage point, to 5.52 percent, according to data compiled by Bloomberg. The price rose 0.74 centavo to 139.30 centavos per peso.

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