Mexico’s Peso and Bonds Rise Amid Gains in Europe, Asia Stocks

By Valerie Rota

Nov. 27 (Bloomberg) -- Mexico’s peso and local-currency bonds advanced as European and Asian stock market gains bolstered demand for higher-yielding, developing-nation assets.

Mexico’s currency has risen 3.8 percent this week, heading for its first gain in three weeks. Investors increased demand for riskier assets on speculation global government efforts to shore up the economy will support consumer demand.

“There is greater sense of calm in the market, and we can see this reflected in yields and the peso,” said Manuel Galvan, a fixed-income strategist at Metanalisis SA in Mexico City.

The peso gained 0.35 percent to 13.2039 per U.S. dollar at 5 p.m. New York time, compared with 13.25 yesterday. The peso was the biggest gainer against the dollar today among the six most-traded currencies in Latin America.

Trading was slower than normal with U.S. markets closed for the Thanksgiving holiday, Galvan said.

The U.S. Federal Reserve said this week it’s committing up to $800 billion to unfreeze credit for homebuyers, consumers and small businesses. The announcement followed the U.S. government guarantee of troubled assets at Citigroup Inc. and President- elect Barack Obama’s pick of New York Fed President Timothy Geithner as Treasury secretary and former Federal Reserve Chairman Paul Volcker to lead an economic advisory board.

The European Union yesterday announced plans to coordinate $258 billion in measures for the economy, while China cut borrowing costs by the most since 11 years.

Europe’s Dow Jones Stoxx 600 Index rose 2.4 percent today, while the MSCI World Index increased 0.9 percent.

Peso Bonds

Mexican peso-denominated bonds advanced for a fifth day, pushing benchmark yields down to an almost three-week low. Mexican bonds have rallied even after the central bank reported this week that inflation surged to a seven-year high of 6.2 percent in the 12 months through mid-November.

Mexico’s central bank will keep its key lending rate at 8.25 percent for a third month, according to 19 of 22 economists surveyed by Bloomberg News. Two economists are forecasting policy makers will lower the rate to 8 percent, while one is expecting a reduction to 7.75 percent.

Yields on the 10 percent bond due December 2024 fell eight basis points, or 0.08 percentage point, to 9.14 percent, the lowest level since Nov. 10. The price of the country’s most- traded security rose 0.72 centavo to 107.24 centavos per peso, according to Banco Santander SA.

To contact the reporter on this story: Valerie Rota in Mexico City at vrota1@bloomberg.net.