Mexican Peso Bonds Went Ahead on Federal Reserve Comments

The Mexican Peso bonds jumped ahead, thereby taking the yields down the most since November, 2011. An official of the Federal Reserve supported a stimulus program which has buoyed the emerging market assets and this helped the Mexican Peso bonds big time. The yields on Mexican Peso debt due in 2024 declined by 18 basis points and the same is now at 5.24%. The decline is the biggest on a closing basis for the yield since 30th November, 2011. The major currency of Mexico, Mexican Peso experienced a fall of 0.1% and it is currently at 12.7524 per USD.

Bonds are rising for the 2nd straight day as the President of the Atlanta Fed, Dennis Lockhart stated on yesterday that the officials are completely committed to record program of purchasing assets though there are divergent views on when the same should be pared back, thereby creating a mixed message for the investors. The foreigner’s holdings of the Mexican fixed rate Government debt went down to a 3-week low figure on 24th May. Incidentally, only a couple of days ago, the Chairman of the Federal Reserve, Ben S. Bernanke indicated that there are possibilities that the monetary stimulus program will be curtailed by the policy makers, in case, the biggest economy in the world, shows signs of a sustained recovery.

According to the Economist of 4Cast, Pedro Tuesta, there was a big sell-off, when it comes to the Mexican bonds. Many of the investors are currently looking at the correct level to go back, as mentioned by Tuesta.

Early in this year, the demand for the fixed income debt of Mexico increased, thereby driving the yields to a record low figure. The foreign investors avoided the near zero interest rates at home and they bet that the Mexican policy makers will pass required legislation to boost the economic growth.

The Deputy Director of the Money Makers and Exchange Department of Grupo Financiero Santander Mexico SAB, Salvador Orozco, stated that there is a difference between US yields and debt of Mexican Government. This difference increased on today, thereby attributing to the rally. Incidentally, the yield gap between 10-year US Treasuries and the Mexican Government bonds maturing in the next 10 years went ahead to a 4-month high figure of 3.35% on 31st May. Since then, it went down by 20 basis points.