Mexico Bonds Rally Before Senate Vote on Energy Bill; Peso Slips

Mexico’s longest-maturity peso bonds rallied as the Senate prepared to vote on legislation that may spur economic growth by giving private companies oil-drilling licenses for the first time in 75 years.

Yields on the government’s fixed-rate debt due in 2042 fell five basis points, or 0.05 percentage point, to a two-week low of 7.63 percent, according to data compiled by Bloomberg. Yields on dollar bonds from state-owned crude producer Petroleos Mexicanos due 2044 declined eight basis points to 6.28 percent, the lowest level since Nov. 18. Mexico’s peso dropped 0.1 percent to 12.8673 per U.S. dollar.

Senate committee members from President Enrique Pena Nieto’s ruling Institutional Revolutionary Party, or PRI, and the opposition National Action Party, known as the PAN, have approved the joint bill that would end Pemex’s monopoly on drilling in the country. The government estimates the energy-industry revamp would lift growth by 1 percentage point by 2018. The full Senate may vote on the bill as soon as today.

“The market is happy,” Claudio Irigoyen, Bank of America Corp.’s head of Latin America fixed-income and foreign-exchange strategy, said by phone. “You’re going to grow more. Therefore you lower the risk premium in the long end of the curve.”

Pena Nieto’s original energy bill, presented in August, would have given private companies less control over oil projects than the new Senate bill.

Mexico’s central bank said it sold 25 billion pesos ($1.94 billion) in one-year bills to yield 3.66 percent at an auction today to manage the amount of cash in the financial system.

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