Background on Banco de México and its Role
Banco de México (Banxico), the country’s central bank, plays a crucial role in maintaining price stability and fostering sustainable economic growth. As the central bank, Banxico implements monetary policy to influence interest rates and control inflation. Its actions directly impact investors, businesses, and the general public in Mexico.
Mixed Investor Response to Short-Term Instruments
Investors have been accepting lower yields on short-term instruments due to the anticipation that Banxico’s reference rate cycle will continue to decline at a slower pace in the coming months, compared to the first half of the year.
28-Day CETES Yields Slightly Increase
The 28-day Certificado de la Tesorería de la Federación (CETES) yield, which is highly sensitive to changes and expectations regarding monetary policy, rose slightly by 0.02% to 7.4%. This represents a minor increase from its lowest level in over three years during the previous auction. The total amount placed was 7,000 million pesos.
91-Day CETES Yields Decrease
Banxico also auctioned 7,000 million pesos in 91-day CETES with a yield of 7.66%, which is 0.03% less than the previous auction. The demand was 3.40 times the amount placed, lower than the preceding 4.84.
Market Anticipation of Fed’s Jackson Hole Symposium
The market eagerly awaits the end of the week for the Reserve Federal’s symposium in Jackson Hole, hoping to gain more clarity on a potential interest rate cut by the US Federal Reserve in September. Such a decision could influence Banxico’s monetary policy trajectory in the following months.
Government Securities Auction Results
The Mexican government issued 15,000 million pesos in MBonos with a 10-year term and maturity in February 2036, at a yield of 9.14%. This represents a decrease of 0.33% compared to the previous issuance. The demand for this instrument was 2.23 times the amount placed.
Three-Year Udibonos Yields Increase
Additionally, Udibonos with a three-year term and maturity in August 2029 were auctioned at a yield of 4.65%, an increase of 0.12% from the previous issuance. The demand was 2.19 times the amount placed.
Key Questions and Answers
- What is the significance of the 28-day CETES yield increase? The slight rise in the 28-day CETES yield reflects investors’ expectations of a continued, albeit slower, decline in Banxico’s reference rate.
- How do the 91-day CETES yields compare to previous auctions? The 91-day CETES yield decreased by 0.03% compared to the last auction, indicating a lower demand for longer-term instruments.
- Why is the market anticipating the Fed’s Jackson Hole Symposium? The symposium is expected to provide insights into the US Federal Reserve’s potential interest rate cut in September, which could influence Banxico’s monetary policy decisions.
- What were the results of the government securities auction? The Mexican government issued MBonos with a 10-year term and Udibonos with a three-year term, both experiencing changes in yields and varying demand levels.
