Mexican Yields Hold at One-Week Low on Rate Outlook; Peso Rises

Yields on Mexico’s benchmark 10-year bonds held at a one-week low on speculation policy makers will cut borrowing costs, driving demand as more of the securities were auctioned.

Yields on government peso bonds due in 2022 were little changed at 5.05 percent at 1:43 p.m. in Mexico City, matching the lowest level on a closing basis since Feb. 6. Mexico’s peso appreciated 0.1 percent to 12.6681 per U.S. dollar.

Mexico sold 8.5 billion pesos ($671 million) of the 2022 bonds at a weekly auction today. The securities have rallied on speculation that inflation heading toward the 3 percent midpoint of the central bank’s target range and an outlook for slower growth will prompt the central bank, known as Banxico, to cut borrowing costs for the first time since 2009.

“Considerations for a potential Banxico cut are increasing, and this seems to be the dominant driver in the markets,” Aryam Vazquez, a New York-based economist at Wells Fargo & Co., said in an e-mailed response to questions.

Banco de Mexico reiterated on Feb. 13 that it may cut its target rate after consumer prices rose 3.25 percent in January from a year earlier, the slowest pace since October 2011. The central bank said it’s more probable that growth will slow than pick up.

Policy makers are scheduled to announce their next interest-rate decision on March 8. They have kept the benchmark at 4.5 percent for 32 straight meetings.

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