Introduction
Banxico, Mexico’s central bank, has reduced its reference interest rate by 250 basis points so far in 2025. This monetary easing has moderated the demand for government securities, but they still appear more attractive compared to debt from other emerging economies.
Demand for Mexican Government Securities
According to Banorte, demand for Cetes (Mexican government securities) across all maturities has slowed down in the past month, falling below the average of the last two years. This trend is a result of Banxico’s expansionary monetary policy.
- As of September 23, institutional investors with the highest government debt holdings in their portfolios were Afores (pension funds) at 27%, followed by investment companies at 19%, foreign investors at 11%, local banks at 8%, and insurance companies at 7%.
- 28% of the total government debt issued this year consisted of reports, guarantees, and values acquired by Banco de México and other local residents.
Expert Opinions
Janneth Quiroz, director of Analysis at Monex Casa de Bolsa, agrees that Banxico’s monetary flexibility has moderated the appeal of short-term debt instruments. She believes this stance will persist throughout the remainder of the year.
“Despite Banxico’s monetary easing, the current interest rate remains attractive for investors seeking returns above those offered by countries with higher credit ratings.”
– Janneth Quiroz, Monex Casa de Bolsa
This year, the Bank of Mexico’s governing board has lowered the reference rate by 250 basis points, reducing it from 10% to 7.50%. Banorte highlights that Mexico’s interest rate remains relatively high compared to other economies like Chile (4.75%) and Peru (4.25%), but is more competitive than Colombia’s (9.25%) due to a more favorable local inflation dynamic.
Attractiveness of Mexican Government Debt
Despite Banxico’s interest rate reduction cycle, Cetes continue to be an attractive option for both domestic and foreign investors relative to debt instruments from other emerging economies mentioned earlier.
“Since Banxico has cut the rate, Cete’s yield has been affected because the reference rate dictates the instrument’s behavior. Lower yield means less interest from savers.”
– Cipactli Jiménez, private investor
Foreign investors and Afores hold the largest long-term debt instrument positions, accumulating 27.68% and 25.67%, respectively, accounting for over 50% of the total in circulation.
The interest of foreign investors and Afores in long-term Mexican government debt is backed by the perception of country risk; the historical volatility of the Mexican peso has remained relatively low amid trade uncertainty, and expectations of further Fed rate cuts within the target range favor government bond attractiveness.
Key Questions and Answers
- What has Banxico done regarding interest rates? Banxico has reduced its reference interest rate by 250 basis points this year, lowering it from 10% to 7.50%.
- How has this affected demand for Mexican government securities? The monetary easing has moderated the demand for short-term government securities, but they remain attractive compared to other emerging economies.
- Who holds the most Mexican government debt? Afores (pension funds) and foreign investors hold the largest amounts of Mexican government debt.
- Why are Mexican government securities still attractive? Despite lower yields due to interest rate cuts, Mexican government securities remain relatively more attractive compared to other emerging economies due to lower inflation and perceived country risk.
