Background on Banxico and its Role
The Bank of Mexico (Banxico) is the country’s central bank, responsible for managing monetary policy to maintain price stability and support economic growth. Its primary tool is setting the Target Interest Rate, which influences other interest rates in the economy.
Recent Trends in Mexican Government Bond Rates
For the sixth consecutive week, Mexico’s government bond rates have fallen in Banxico’s recent weekly auction of securities. This trend reflects investors’ preference for short-term instruments with higher yields, anticipating that Banxico will continue its downward interest rate cycle.
Banxico’s Interest Rate Policy
Banxico aims to maintain its decreasing interest rate trend, but this could change if inflation shows signs of moving away from the 3% target. In their latest meeting, Banxico reduced the Target Interest Rate by half a percentage point and left open the possibility of another reduction.
Impact of US Trade Policy on Mexico
The new trade policy by the US government under Donald Trump remains uncertain regarding its effects on Mexico’s inflation. Given the interconnectedness of both economies, any changes in US policy could have significant repercussions for Mexico.
Recent Auction Details
Banxico auctioned 7,000 million pesos in Cetes (Certificates of Treasury) for 28 days at an 8.12% rate, the lowest since August 2022 and 0.03 percentage points lower than the previous issue. Demand was 2.89 times the amount auctioned, down from 3.39 times in the previous auction.
For Cetes with 91 days maturity, Banxico auctioned 7,000 million pesos at an 8.14% rate, the lowest since June 2022, a decrease of 0.10 percentage points from the previous issue. Demand was 4.84 times the amount auctioned, up from 4.01 times in the previous auction.
The Mexican government issued 8,000 million pesos in Cetes for 182 days at an 8.12% rate, a decrease of 0.04 percentage points from the previous offer, placing it at its lowest level since May 2022. Demand was 4.12 times the amount auctioned, up from 3.78 times in the previous week.
Banxico also auctioned 11,500 million pesos of the MBono for 30 years (maturing in July 2053) at a 10.01% rate, a decrease of 0.19 percentage points from the previous issue. Demand was 2.01 times the amount auctioned.
Key Questions and Answers
- What is the current trend in Mexico’s government bond rates? Rates have fallen for the sixth consecutive week in Banxico’s weekly auctions.
- Why are investors preferring short-term instruments? Investors expect Banxico to continue its downward interest rate cycle.
- What could alter Banxico’s interest rate policy? If inflation moves away from the 3% target, Banxico might change its trend.
- How might the US trade policy affect Mexico? The impact remains uncertain, given the interconnectedness of both economies.
- What were the details of the recent Banxico auction?
- 28-day Cetes: 7,000 million pesos at 8.12%, lower than the previous issue; demand was 2.89 times the amount auctioned.
- 91-day Cetes: 7,000 million pesos at 8.14%, the lowest since June 2022; demand was 4.84 times the amount auctioned.
- 182-day Cetes: 8,000 million pesos at 8.12%, the lowest since May 2022; demand was 4.12 times the amount auctioned.
- 30-year MBono: 11,500 million pesos at 10.01%, lower than the previous issue; demand was 2.01 times the amount auctioned.
