Mexico bonds post biggest weekly gain
Sunday, 25 April 2010
MEXICO CITY, Apr 24 (Bloomberg): Mexico's benchmark peso bonds posted the biggest weekly gain in more than a year after consumer prices unexpectedly fell in the first half of April.
The yield on the nation's 10 per cent bond due December 2024 fell 22 basis points, or 0.22 percentage point, to 7.62 percent this week, according to Banco Santander SA. The price rose 2.19 centavos since April 16 to 120.90 centavos. The yield declined two basis points today to the lowest level since Jan 23, 2009.
"Inflation was way below what was expected," said Julio Ramirez, head trader for Vector Casa de Bolsa in Mexico City. "The country's recovery is also taking hold, so I think people are looking at places where there are high yields, like Mexico."
Mexican consumer prices unexpectedly declined 0.31 per cent in the first half of April, reinforcing forecasts the central bank may hold off on raising interest rates until 2011.
Ramirez said Mexican bonds were already rising this week before yesterday's inflation report because of the securities' inclusion in Citigroup Inc's World Government Bond Index on March 31, and signs Mexico's economy is recovering after contracting 6.5 per cent last year.
Rafael Camarena, an economist with Banco Santander SA in Mexico City, said the more optimistic outlook for Mexico has motivated foreign investors and local pension funds to increase fixed-income positions.
The International Monetary Fund this week raised its 2010 growth forecast for Mexico to 4.2 per cent from 4 per cent.
Mexico's peso rose 0.3 per cent to 12.1795 per US dollar today, from 12.21 yesterday. The currency has strengthened 0.8 per cent this week and is the best performer against the dollar so far this year among 16 major currencies strengthening 7.5 per cent.
Traders triggered $5 million in dollar options on April 21, exhausting all $600 million in options the central bank offered this month. The bank has been auctioning the options monthly to boost foreign reserves after the peso fell to a record low last year.
The yield on the nation's 10 per cent bond due December 2024 fell 22 basis points, or 0.22 percentage point, to 7.62 percent this week, according to Banco Santander SA. The price rose 2.19 centavos since April 16 to 120.90 centavos. The yield declined two basis points today to the lowest level since Jan 23, 2009.
"Inflation was way below what was expected," said Julio Ramirez, head trader for Vector Casa de Bolsa in Mexico City. "The country's recovery is also taking hold, so I think people are looking at places where there are high yields, like Mexico."
Mexican consumer prices unexpectedly declined 0.31 per cent in the first half of April, reinforcing forecasts the central bank may hold off on raising interest rates until 2011.
Ramirez said Mexican bonds were already rising this week before yesterday's inflation report because of the securities' inclusion in Citigroup Inc's World Government Bond Index on March 31, and signs Mexico's economy is recovering after contracting 6.5 per cent last year.
Rafael Camarena, an economist with Banco Santander SA in Mexico City, said the more optimistic outlook for Mexico has motivated foreign investors and local pension funds to increase fixed-income positions.
The International Monetary Fund this week raised its 2010 growth forecast for Mexico to 4.2 per cent from 4 per cent.
Mexico's peso rose 0.3 per cent to 12.1795 per US dollar today, from 12.21 yesterday. The currency has strengthened 0.8 per cent this week and is the best performer against the dollar so far this year among 16 major currencies strengthening 7.5 per cent.
Traders triggered $5 million in dollar options on April 21, exhausting all $600 million in options the central bank offered this month. The bank has been auctioning the options monthly to boost foreign reserves after the peso fell to a record low last year.