Background on Cetes and the Mexican Economy
Cetes, or Certificados de la Tesorería de la Federación (Federal Treasury Certificates), are short-term government debt instruments in Mexico. They serve as a crucial tool for the Bank of Mexico (Banxico) to implement monetary policy. Recently, Cetes have gained attention due to fluctuations in interest rates and their demand among investors.
Interest Rate Adjustments by Banxico
Since January 2023, the Bank of Mexico’s governing board has reduced the reference interest rate by 250 basis points, lowering it from 10% to 7.5%. This aggressive monetary policy aims to stimulate economic growth amidst global uncertainties.
Cetes Demand and Interest Rates
According to Citi’s survey of experts, analysts anticipate another 25 basis points reduction in the interest rate during the upcoming meeting. Moreover, most experts expect the reference monetary rate to conclude the year at 7%.
On Tuesday, the 28-day Cetes interest rate was set at 7.47%, an increase of 0.28% from the previous issuance, marking its highest level since August 5 (7.50%) when it was last auctioned. The issued amount was 7,000 million pesos, with demand reaching 2.14 times the offered sum – lower than the previous issuance.
Cetes Attractiveness Amidst Interest Rate Cuts
Despite the series of interest rate cuts by Banxico, Cetes remain an attractive investment option for both domestic and foreign investors relative to other emerging market instruments. Mexico’s interest rate remains comparatively high, at 7.47%, compared to countries like Chile (4.75%) and Peru (4.25%). However, it is more competitive than Colombia’s 9.25%, thanks to a more favorable local inflation dynamic.
Investor Perspectives
Cipactli Jiménez, a private investor, explained that multiple interest rate cuts by Banxico have negatively affected Cetes’ appeal, as the reference rate dictates their behavior. Lower interest rates mean less interest for savers.
Banorte’s Forecast
Janneth Quiroz, director of analysis at Monex Casa de Bolsa, stated that demand for Cetes is expected to remain robust in the last quarter of 2025, exceeding 2.2 times the demand level, due to their attractive yields compared to other emerging markets. This outlook is supported by expectations that the Federal Reserve will also cut its interest rate, narrowing the interest rate differential between Mexico and the US and bolstering demand for local debt instruments.
Key Questions and Answers
- What are Cetes? Cetes, or Certificados de la Tesorería de la Federación, are short-term government debt instruments in Mexico.
- What has Banxico been doing regarding interest rates? Since January 2023, the Bank of Mexico’s governing board has reduced the reference interest rate by 250 basis points, lowering it from 10% to 7.5%.
- Why are Cetes still attractive despite interest rate cuts? Cetes remain competitive compared to other emerging market instruments, with Mexico’s interest rate at 7.47%, which is higher than Chile and Peru but more competitive than Colombia’s 9.25%.
- What do experts predict for Cetes demand and interest rates? Experts anticipate another 25 basis points reduction in the interest rate and expect the reference monetary rate to conclude the year at 7%. Cetes demand is projected to remain robust in the last quarter of 2025, exceeding 2.2 times the demand level.
