Mexico’s Local Currency Bond Yields Fall Before Rate Decision

Yields on Mexican peso bonds fell to a record low on speculation central bankers will indicate at a policy meeting today that they’re considering cutting interest rates for the second time this year.

Yields on benchmark peso bonds due in 2024 fell three basis points, or 0.03 percentage point, to 4.54 percent at 8:12 a.m. in Mexico City, according to data compiled by Bloomberg. Securities due in December fell one basis point to a record low 3.86 percent, or 14 basis points below the central bank’s key rate of 4 percent.

While all 19 economists in a Bloomberg survey expect the bank’s board to hold the rate unchanged today, the statement that accompanies the decision is likely to be “more dovish,” according to an e-mailed research note today from Grupo Financiero Banorte SAB.

“Appetite for debt instruments will continue to be elevated on the growing expectation of a possible cut in the reference rate” in the second half of the year, Banorte strategist Juan Carlos Alderete said today in the report.

Mexico’s peso fell 0.1 percent to 12.1795 per U.S. dollar, trimming its advance to 5.5 percent this year, still the most among the dollar’s 16 major counterparts tracked by Bloomberg.

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