Background on Banxico and its Role
Banxico, or the Bank of Mexico, is the country’s central bank responsible for implementing monetary policy. It aims to maintain price stability and support economic growth by managing interest rates, foreign exchange reserves, and other financial tools.
CETES Rates Drop in Latest Auction
In the most recent auction, Banxico saw a predominantly downward trend in CETES (Certificados de la Tesorería de la Federación) rates. The 28-day CETES rate fell to 6.95%, marking a decrease of 0.05% from the previous auction and reaching its lowest level since May 2022. A total of 5,000 million pesos were placed, with demand at 4.98 times the amount offered.
CETES Rates Breakdown
- 28-day CETES: 6.95% (down from previous auction)
- 91-day CETES: 7.10% (unchanged from previous week, lowest since April 2022)
- 175-day CETES: 7.14% (down from previous week)
- 693-day CETES: 7.82% (down for the third consecutive auction)
Market Expectations and Banxico’s Future Plans
Investors are preparing for the first monetary policy decision from the U.S. Federal Reserve (Fed), anticipating that the Fed will keep its benchmark rate unchanged within the 3.5% to 3.75% range due to persistent inflation, weak employment, and tensions with the White House.
Banxico recently announced its 2026 Monetary Policy Program, indicating that it may continue reducing interest rates if recent tax and tariff modifications impact the prices of certain goods.
The current benchmark rate set by Banxico stands at 7%. The next meeting of Banxico’s Governing Board is scheduled for February 5, and according to Citi Group’s survey and statements from some board members, no adjustments are expected.
Additional Auction Details
In the auction, 8,000 million pesos of the 175-day CETES were placed at a rate of 7.14%, a decrease of 0.12% from the previous week. The instrument saw demand at 3.99 times what was offered, higher than the last auction.
The 693-day CETES rate dropped by 0.07%, settling at 7.82%. This marks the third consecutive auction with a declining rate. A total of 18,700 million pesos were placed, with demand at 2.31 times the amount offered.
MBono and Udibonos Auctions
Banxico also conducted an auction for 16,000 million pesos of the MBono with a February 2030 maturity date, which yielded an interest rate of 8.23%. This represents a marginal increase of 0.28% compared to the previous issue, marking its second consecutive auction with rising rates.
Additionally, Udibonos with a maturity date of October 2057 were issued at a rate of 4.25%, a marginal decrease of 0.01%. The amount placed was 9,977.30 million pesos, with demand at 2.40 times what was offered.
Key Questions and Answers
- What is Banxico? Banxico, or the Bank of Mexico, is the country’s central bank responsible for implementing monetary policy.
- What are CETES? CETES (Certificados de la Tesorería de la Federación) are interest-bearing securities issued by the Mexican government to finance public spending.
- Why are CETES rates important? Changes in CETES rates can influence borrowing costs for the government and businesses, affecting investment decisions and overall economic activity.
- What is the current state of U.S. monetary policy? The Federal Reserve (Fed) is expected to keep its benchmark rate unchanged within the 3.5% to 3.75% range due to persistent inflation, weak employment, and tensions with the White House.
- What does Banxico’s Monetary Policy Program indicate? Banxico may continue reducing interest rates if recent tax and tariff modifications impact the prices of certain goods.
