Yields up
The greater caution of the market over Mexico has forced a rise in the premium that the sovereign debt must pay. The yield on the benchmark 10-year bond stood at 6.97% on Friday, up from 5.30% at the end of 2020.
However, the yields of Mexican papers are lower than those offered by the debt of Brazil, an economy that is frequently compared to Mexico, and whose central bank began to raise its key rate since March, while the Mexican one did. until June.
Analysts also agreed that some controversial government decisions, which have hit the interests of private companies, mainly in the energy sector, have affected the perception of risk on the Mexican economy.
“The uncertainty that has been generated about respect for the rule of law has been a constant criticized in the private sector,” Ramsé Gutiérrez, co-chief investment officer at asset manager Franklin Templeton, told Reuters.
The expert, who said that he expects this year’s capital outflow to not be as large as the previous one, added that Mexican debt currently operates with higher yields than it should have with the current sovereign rating, which means that some investors they have discounted new sales.
Gutiérrez said that another factor that has put pressure on capital flows to Mexico is the inclusion of China’s bonds in emerging market debt indices, driving foreign holdings of that country’s bonds to record levels.
Index provider FTSE Russell approved in March that the Asian giant’s sovereign bonds be included in its flagship debt index at the end of 2021.
Meanwhile, the Mexican peso, seen as a local risk thermometer, has been more stable given the entry of foreign currency into the country through other channels, such as record remittances and a recovery in manufacturing exports. So far this year it has gained 0.14%.