Background on CETES and Banco de México
Certificados de la Tesorería de la Federación (CETES) are short-term Mexican government bonds issued by the Mexican Treasury to finance the federal government’s short-term obligations. Banco de México (Banxico), the country’s central bank, sets and manages these interest rates. Banxico plays a crucial role in maintaining price stability and promoting sustainable economic growth.
Recent CETES Performance and Trends
The 28-day CETES yield has dropped for the second consecutive week, reaching its lowest level since mid-June 2022 at 7.10%, according to the latest auction results from Banco de México.
- Significant Drop: The yield decreased by 30 percentage points, and the amount placed was 7,000 million pesos with demand at 3.07 times the offered amount.
- Yearly Trend: The 28-day CETES yield has fallen by 264 basis points this year, aligning with the ongoing downward cycle set by the central bank’s reference rate.
The next Junta de Gobierno meeting of Banco de México is scheduled for November 6, where another 25 basis points cut to the interest rate is anticipated.
CETES Performance Across Different Terms
Alongside the 28-day CETES, other terms also experienced a decline:
- 91-Day CETES: 7,000 million pesos were placed at a rate of 7.30%, down 0.05 percentage points from the previous emission, with demand at 4.67 times the amount offered. The yield has decreased by 249 basis points this year.
- 175-Day CETES: 12,000 million pesos were issued at a rate of 7.41%, a decrease of 0.08 percentage points from the previous auction, with demand at 3.34 times the amount placed—higher than the last placement.
- 679-Day CETES: 15,000 million pesos were auctioned at a rate of 7.76%, down 0.09 percentage points from the last emission, with demand at 2.59 times the amount placed.
Impact on Mexican Economy and Investors
The continuous decline in CETES yields indicates that Banxico is trying to stimulate economic growth by lowering borrowing costs for the government and encouraging private investment. This move can potentially lead to increased spending, higher inflation, and a more robust economy. However, it may also result in reduced returns for conservative investors who rely on CETES as a safe investment option.
Key Questions and Answers
- What are CETES? CETES are short-term government bonds issued by the Mexican Treasury to finance federal obligations.
- Who sets CETES interest rates? Banco de México (Banxico), the country’s central bank, sets and manages CETES interest rates.
- Why are CETES yields falling? Banxico is lowering interest rates to stimulate economic growth and encourage investment.
- What are the implications for investors? Lower CETES yields may reduce returns for conservative investors but could lead to increased private investment and economic growth.
