Mexico Bonds Rally Most in One Week as CPI Falls; Peso Declines

Mexico’s peso bonds rallied, pushing yields down the most in a week, after the national statistics agency said consumer prices fell in June.

Yields on benchmark debt maturing in 2024 fell 12 basis points, or 0.12 percentage point, to 5.83 percent, according to data compiled by Bloomberg. The peso declined 0.1 percent to 12.8964 per U.S. dollar.

“Investors found levels to be attractive and bought early in the day,” Alejandro Silva, founding partner at Silva Capital Management LLC who helps manage $800 million in emerging-market assets, said in an e-mailed response to questions. “Lower-than-expected CPI data helped to continue to propel the move later in the morning.”

The national statistics agency said consumer prices in June slid 0.06 percent from May, compared with a 0.02 percent drop that was the median forecast of 22 economists surveyed by Bloomberg. Farm prices tumbled 3 percent, helping push annual inflation to 4.09 percent from 4.63 percent in May, heading toward the central bank’s 2 percent to 4 percent target range.

Energy Reform

Longer-term debt also rallied after the opposition National Action Party spokesman Juan Molinar Horcasitas said that the party known as the PAN has almost completed its proposal for energy reform, Silva said. President Enrique Pena Nieto has said he’s confident he can get opposition parties to cooperate to pass by the end of the year an overhaul of the state-controlled energy industry to boost growth.

Yields on Mexico’s fixed-rate bonds maturing in 2042 tumbled 14 basis points, or 0.14 percentage point, to 6.94 percent, according to data compiled by Bloomberg.

Molinar Horcasitas said in comments during a telephone interview yesterday that the PAN’s energy reform proposal, which would amend the constitution, is “practically completed.”

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