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 Business News | October 2006 
Mexican 10-Year Peso Bond Climbs as Inflation Concerns Ease
 Valerie Rota - Bloomberg
Mexico's 10-year peso bond rose the most in two weeks on expectation the increase in consumer prices during September was temporary and will abate by yearend.
Central bank Governor Guillermo Ortiz yesterday said the inflation rate will fall below 4 percent by December as the prices of agricultural products drop, reported Mexico City-based daily El Universal.
"Investors are buying the idea that the spike in inflation was temporary after Ortiz' comments," Pablo Septien, who manages $350 million of bonds at investment fund Finaccess Mexico SA, said in a phone interview from Mexico City. "The outlook for investment is looking good."
The yield on the government bond maturing in December 2015 fell 4 basis points, or 0.04 percentage point, to 8.38 percent, the biggest one-day decline since Sept. 26. The price, which moves inversely to the yield, rose 0.25 centavo to 97.56 centavos at 3:10 p.m. in New York, according to Santander Central Hispano SA.
The yield on the 10-year bond rose 5.8 basis points over the previous two days after the central bank said consumer prices rose 1 percent in September, the biggest increase in six years. Annual inflation accelerated to 4.1 percent from 3.5 percent in August as the hurricanes that hit the Pacific coast last month boosted the cost of tomatoes, the bank said Oct. 9.
Mexico's central bank targets inflation at 3 percent, plus or minus 1 percentage point.
'Smoother Time'
Mexican bonds and the currency also rose after protesters from the state of Oaxaca agreed on Oct. 9 to end a five-month blockade of the state's capital, Septien said.
Since May, demonstrators in Oaxaca have cut off access to Oaxaca City, blocking highways and burning buses, forcing businesses to shut down and driving tourism to a halt.
President-elect Felipe "Calderon probably won't inherit this problem when he takes office," Septien said. "This expectation makes it likelier that Calderon will have a smoother time in passing legislation needed to bolster growth."
Calderon, who takes office on Dec. 1, has pledged to pare government spending on pensions and simplify the tax code to boost revenue. Calderon, a member of President Vicente Fox's party, has also pledged to maintain the economic policies that reined in government spending, helping drive down the inflation rate to historic lows.
The peso rose for a second day, gaining 0.2 percent to 11.0233 per dollar, the best performance against the dollar of the 16 most-traded currencies.
To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net |
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