Mexico Bonds Slump With Peso as U.S. Jobs Fuel Fed Taper Concern

Mexico’s peso bonds fell as a report showing fewer Americans filed for unemployment benefits encouraged speculation that policy makers will cut U.S. monetary stimulus at a faster pace than previously projected.

Yields on benchmark fixed-rate peso bonds maturing in 2024 increased two basis points, or 0.02 percent, to 6.54 percent, the highest since Sept. 5, according to data compiled by Bloomberg. The peso depreciated 0.4 percent to 13.0843 per U.S. dollar.

The Federal Reserve said Dec. 18 that it will cut its monthly bond buying by $10 billion to $75 billion in a first step toward unwinding the stimulus, citing an improving labor market. Mexico’s bonds have benefited from the increased liquidity in capital markets produced by the Fed’s program. The debt is falling as the jobs report is the latest piece of “good data” signaling a U.S. recovery, according to Mario Copca, a currency and fixed-income strategist at Metanalisis SA.

“This is influencing the expectation that the Fed could begin sooner than projected with an accelerated reduction in stimulus,” Copca said in a phone interview. “This is going to be directly incorporated” into Mexico’s peso bonds, he said.

Jobless claims declined by 42,000 to 338,000 in the week ended Dec. 21, a Labor Department report showed today in Washington. The median forecast of 42 economists surveyed by Bloomberg called for a drop to 345,000.

In Mexico, the national statistics agency said that Mexico had a preliminary trade balance of $339.1 million for November.

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