Mexico Bonds Climb as Fed Maintains Stimulus; Peso Erases Drop

Mexico’s peso bonds rose after the Federal Reserve pledged to maintain a stimulus program that has supported the Latin American nation’s debt.

The yields on Mexican government peso bonds maturing in 2022 fell two basis points, or 0.02 percentage point, to 5.97 percent at 4 p.m. in Mexico City, according to data compiled by Bloomberg. The yields have climbed 17 basis points this month. The peso increased, appreciating 0.3 percent to 12.7320 per dollar, leaving it up 1.6 percent for the month.

The Fed statement “was very direct in saying that stimulus is going to continue,” Jose Carreno, a bond trader at Banco Base SA, said in a telephone interview from San Pedro Garza Garcia, Mexico.

The Fed repeated today a pledge it has used since September that it will continue its monthly asset purchases until the U.S. labor market outlook has improved substantially. Policy makers also left unchanged their commitment to hold the target lending rate near zero as long as the jobless rate remains above 6.5 percent and the outlook for inflation over one to two years doesn’t exceed 2.5 percent. Foreign investors looking to escape near-zero rates at home boosted holdings of peso debt to a record earlier in 2013.

The currency pared losses earlier today on speculation rival political parties will be able to agree on legislative changes affecting the energy industry that are intended to boost economic growth.

Energy Proposal

Senator Salvador Vega, an opposition leader on the Energy Committee, said in a telephone interview that his National Action Party’s energy overhaul proposal presented today would open the door for selling shares in state-owned Petroleos Mexicanos. President Enrique Pena Nieto has pledged to pass legislative changes to open the nation’s state-owned oil monopoly to more private investment and boost tax collection.

Pena Nieto said in an interview in London last month that his administration will send bills to overhaul energy and tax policies in September and that the so-called Pact for Mexico alliance between the nation’s three leading political parties will assure approval by Congress to end the government’s monopoly on oil production before year-end.

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