Background on Banco de México (Banxico) and its Role
Banco de México (Banxico) is the central bank of Mexico, responsible for implementing monetary policy to maintain price stability. It plays a crucial role in managing the country’s financial system and ensuring economic growth.
Recent CETES Auction Results
This week, the 28-day CETES yields reached unseen levels since August, according to Banxico’s government securities auction results. Despite expectations that monetary policy will continue to relax throughout the year, the 28-day CETES yield rose to 7.47%, up 0.28% from the previous issuance, marking its highest level since August 5 (7.50%).
- Issuance amount: 7,000 million pesos
- Demand: 2.14 times the offered amount, lower than the previous issuance
Banxico also issued 7,000 million pesos in CETES for 91 days at a rate of 7.44%, down 0.03 percentage points from the previous issuance, with demand at 3.35 times.
Banxico has seen six consecutive weeks of decline in this instrument, with a 0.24% decrease over the period.
Future Monetary Policy and Market Expectations
Banxico’s Junta de Gobierno has signaled further rate cuts, contingent on economic indicators’ evolution. A recent Citi survey of experts anticipates another 25 basis points reduction in the interest rate at this month’s meeting.
Most experts also expect the policy rate to end at 7%, according to the survey.
The market will closely watch the release of minutes from Banxico’s latest policy meeting on Thursday.
Additional Auction Details
Banxico issued 174-day CETES for 12,300 million pesos at a rate of 7.48%, down 0.07 percentage points from the previous auction, with demand at 3.84 times.
The government issued 693-day CETES for 15,200 million pesos at a rate of 7.85%, down 0.04 percentage points from the previous auction, with demand at 3.25 times.
A sub-auction of 10,000 million pesos of the MBono for 30 years (maturing in July 2053) took place at a rate of 9.32%, down 0.25% from the previous issuance. Demand for this instrument was 1.84 times the amount issued.
Key Questions and Answers
- What are CETES? CETES (Certificados de la Tesorería de la Federación) are Mexican government bonds issued by the Ministry of Finance to finance public spending.
- Why are these auction results significant? The recent rise in CETES yields, despite expectations of monetary policy relaxation, suggests that investors may be anticipating higher inflation or interest rates in the future.
- What is Banxico’s role in the Mexican economy? Banxico is responsible for maintaining price stability and managing the country’s financial system, ensuring economic growth.
- What do the recent auction results indicate about market expectations? Market participants expect further monetary policy easing, as indicated by the demand for shorter-term CETES decreasing while longer-term yields rise.
