Mexico Longest-Term Bonds Slump With Peso as Yields Reach Record

Mexico’s longest-dated peso bonds dropped, pushing yields to a record high, as concern mounted that the U.S. Federal Reserve will move soon to reduce record monetary stimulus that has boosted demand for the securities.

Yields on the debt maturing in 2042 increased five basis point, or 0.05 percentage point, to 7.76 percent, the highest level on a closing basis since the securities began trading in April 2012, according to data compiled by Bloomberg. The peso depreciated 0.6 percent to 13.0464 per U.S. dollar.

This month’s sell-off in Mexico’s longer bond maturities picked up last week when minutes of the Fed’s October policy meeting showed officials expected to reduce their $85 billion in monthly asset purchases “in coming months” as the economy improves. The bond-buying helped drive foreign holdings of Mexican local-currency government debt to an all-time high earlier this year.

“People are nervous about emerging-market fixed income at the moment, and that’s certainly something that’s coming through on Mexico in the long end of the curve,” Vivienne Taberer, who helps oversee $14 billion in fixed-income and currency emerging-market assets at Investec Asset Management, said in a telephone interview from Cape Town. “People want yield, but they don’t necessarily want duration.”

Mexico sends about 80 percent of its exports to the U.S. The deficit in the Latin American nation’s current account, the broadest measure of a country’s trade in goods and services, deepened to $5.457 billion in the third quarter, the central bank reported today. The median forecast of economists surveyed by Bloomberg was for a gap of $3.420 billion.

The unemployment rate fell to 5.01 percent last month, the lowest level since June, the national statistics agency said. The median forecast was for a drop to 5.15 percent.

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