Mexican Benchmark Bonds Follow Treasuries Rally Before U.S. GDP

Mexican benchmark peso bonds rallied the most in two weeks, following U.S. Treasuries higher, before a report forecast by economists to show contraction in the Latin American country’s chief export market.

The securities due in 2024 advanced 0.68 centavo to 132.77 centavos per peso at 4 p.m. in Mexico City, according to data compiled by Bloomberg. Yields fell seven basis points, or 0.07 percentage point, to 5.83 percent. The peso slipped 0.1 percent to 12.8744 per U.S. dollar.

Bonds advanced with Treasuries before a report due tomorrow that economists predict will show U.S. gross domestic product contracted 0.5 percent in the first quarter. Federal Reserve Chair Janet Yellen testified to lawmakers this month that the economy still requires a strong dose of stimulus.

“We’re following U.S. Treasuries,” Gerardo Welsh, head of money markets at Banco Base SA, said in an e-mailed response to questions. “What you expect with economic weakness is that the Fed and Banco de Mexico will take longer to raise rates.”

The 60-day correlation coefficient between 10-year Mexican government bonds and comparable Treasuries rose today to 0.42, with a reading of 1 meaning the two securities move in lockstep.

Mexico’s national statistics agency reported on May 23 that gross domestic product expanded 1.8 percent in the first quarter from a year earlier, trailing the 2.1 percent median forecast of economists.

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