Mexico Bonds Rise on View Rates Will Hold Steady; Peso Advances

Mexico’s peso bonds climbed following last week’s rally amid speculation cooling inflation will allow the central bank to keep borrowing costs at a record low this year.

The benchmark local-currency bonds due in 2024 rose 0.37 centavo to 139.85 centavos per peso at 4 p.m. in Mexico City. Yields fell three basis points, or 0.03 percentage point, to 5.45 percent after dropping five basis points last week. Mexico’s peso gained 0.5 percent to 12.5938 per U.S. dollar today.

The annual rate of consumer price increases slowed in December to 3.57 percent, below the 4 percent upper end of the central bank’s target for the first time since May, a Jan. 9 government report showed. The central bank will hold the target lending rate at a record low 4.5 percent on Jan. 18, according to all of the 17 economists surveyed by Bloomberg.

The policy statement will probably boost speculation that the bank will stay on hold for the rest of the year, Javier Belaunzaran, who helps manage about $3 billion of debt at Grupo Financiero Interacciones SA, said in a telephone interview from Mexico City. The central bank’s statement is likely to be “a bit dovish. Inflation came out better than expected.”

Citigroup Inc.’s Banamex unit said in a note to clients that the central bank’s statement will have “significant changes,” with policy makers possibly removing language about reasons they would raise interest rates.

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