Mexico Long-Term Bond Yields Fall to Record on Cut Expectations

Mexico’s longer-term peso bond yields tumbled to record lows as investors bet policy makers led by central bank Governor Agustin Carstens would cut the reference rate this week for the first time since 2009.

Yields on peso bonds due in 2042 fell four basis points, or 0.04 percentage point, to 5.99 percent today, according to data compiled by Bloomberg. It’s the lowest closing level since the debt was issued last April. The price rose 0.77 centavo to 124.45 centavos per peso today. The peso appreciated 0.1 percent to 12.7454 per dollar.

Speculation has been mounting that Banco de Mexico will reduce its 4.5 percent benchmark rate since policy makers said Jan. 18 a reduction “may be advisable” if cost-of-living increases continue to ebb. The rate of consumer price increases slowed for four straight months through January, with the rate falling to 3.25 percent that month.

“If there’s a cut and the whole curve moves down in terms of yield then you have capital gains on the price,” Alejandro Urbina, who helps oversee $800 million in emerging-market assets at Silva Capital Management, said by phone from Chicago. “Your maximum gains on that price is with the highest duration at the very long end.”

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