Banxico’s Monetary Easing Continues to Drive Down Yields
According to Banxico, the 28-day Certificado de la Tesorería de la Federación (Cete) yield has decreased by 269 basis points so far in 2025, aligning with the central bank’s monetary easing cycle.
Recent Developments in Interest Rates
Last week, Banxico’s Junta de Gobierno agreed to cut the reference rate by 25 basis points, placing it at 7.25%.
Governor Victoria Rodríguez Ceja hinted on Monday that another quarter-point reduction in the interest rate is highly probable during the upcoming policy meeting on December 18.
“The adjustment is already priced in by the market, so it wouldn’t be a surprise. This would continue our cycle of cuts,” said the governor.
Banxico’s Monetary Policy Actions
Banxico has lowered the interest rate 12 times, beginning in March 2024, and has reduced it by a total of 400 basis points so far.
However, the yields on Cetes with 91, 182, and 364-day terms have increased.
Details of Recent Cete Auctions
In the recent auction, Banxico placed 7,000 million pesos worth of 28-day Cetes at a yield of 7.05%, with demand being 2.67 times the amount offered.
The 91-day Cetes were issued at a yield of 7.27%, up by 0.04 percentage points from the previous issuance, with demand being 2.5 times the amount placed.
The 182-day Cetes were issued at a yield of 7.38%, an increase of 0.09 percentage points from the previous auction, with demand being 2.32 times the amount placed.
Lastly, Banxico issued 14,600 million pesos worth of 364-day Cetes at a yield of 7.51%, up by 0.14 percentage points from the last issuance, with demand being 2.60 times the amount placed.
Key Questions and Answers
- What is the Certificado de la Tesorería de la Federación (Cete)? The Cetes are short-term Mexican government bonds issued by the National Treasury to finance public spending. They come in various maturities, including 28-day, 91-day, 182-day, and 364-day terms.
- Who is Victoria Rodríguez Ceja, and why is she relevant? Victoria Rodríguez Ceja is the Governor of Banco de México (Banxico), Mexico’s central bank. As the head of the central bank, she plays a crucial role in setting monetary policy and influencing interest rates, which impact the broader economy.
- How does Banxico’s monetary easing affect the Cete yields? When Banxico implements monetary easing measures, such as reducing the reference interest rate, it typically leads to lower yields on short-term government securities like the Cetes. This is because investors seek higher returns, driving down yields as they adjust their portfolios.
- What is the significance of the 269 basis points reduction in Cete yields? The 269 basis points reduction in Cete yields signifies that Banxico has been actively lowering short-term interest rates to stimulate economic growth and support Mexico’s recovery from the pandemic-induced slowdown.
- Why are the yields on longer-term Cetes (91, 182, and 364 days) increasing? The increase in yields for longer-term Cetes could be due to market expectations of future interest rate hikes by Banxico, as the economy recovers and inflationary pressures build up.
