Bond Buyers Hard to Come by in Mexico as Rate Bets Upend Auction

  • Demand for peso notes fell to lowest since at least April 2014
  • Investors expect central bank to raise interest rates

Mexico is having a hard time luring investors to its local bonds.

At a Tuesday auction of 20-year peso notes, the bid-to-cover ratio -- which gauges demand by comparing total bids with the amount of debt offered -- sank to the lowest since at least April 2014, according to the central bank. Yields on the notes surged 0.34 percentage points from an auction six weeks earlier.

Investors are shunning Mexico’s local debt amid growing speculation policy makers in Latin America’s second-biggest economy and in the U.S. are poised to boost interest rates, said Roberto Ivan Garcia, a bond trader at Mexico City-based brokerage Finamex. In the minutes of the central bank’s last policy meeting, a Mexico board member said an increase in borrowing costs is likely in the coming months despite low inflation and sluggish economic growth. Demand for the nation’s debt is also weakening as the peso posts the worst slide among Latin American currencies this month, slumping 6.9 percent.

“Yields rose so much because the market is now expecting an increase in rates by both Banxico and the Fed,” Garcia said.

The peso fell 0.2 percent to 18.5005 at 9:18 a.m. in New York.

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