Foreign investors show greater enthusiasm for Mexican debt bonds in the last 10 weeks, according to information from the Bank of Mexico.
From December 1 of last year to February 9, 2022, non-resident portfolios increased their positions in Mexico by 45,304 million pesos, a positive flow that breaks with the consistent outflow observed in the last two years.
Information from the central bank shows that so far this year, that is, for six weeks, a positive flow of 5,340 million pesos was registered towards Mexican debt securities. Although this entry has remained volatile, the balance is positive.
According to the director of Debt and Multiassets of BlackRock Mexico, José Luis Ortega, once inflation reached its maximum in December and began to moderate, a change in the enthusiasm of investors towards Mexico began to be seen.
Mexico offers one of the most competitive margins among its peers in Latin America, he noted. A positive real rate in a world that, despite the upward cycle, continues to be dominated by negative yields.
After the increase in the rate on February 10, Mexico grants a positive margin to investors of 1.8 points, which results from considering the nominal rate, which today is 6% less the expected inflation in 12 months, which according to the consultancy Oxford Economics will be 4.2 percent this year.
Brazil, for its part, offers a real yield of 5.45%, assuming the loss of purchasing power (5.3%, according to Oxford Economics) against its nominal rate of 10.75 percent. Both countries now have the most attractive nominal and real rates of their peers in Latin America.
The rest of the regional emerging markets that are rating peers with Mexico offer less attractive margins.
The sample is in Chile and Peru, which have real rates of 0.2% respectively, both positive, and at the extreme is Colombia, which despite the increase in January, is the only one of the four Latin American giants that maintains a negative return due to the expected inflation, which according to Oxford Economics will be the highest in the comparison (5.7 percent).
The BlackRock strategist observes that Mexico brings an important advantage over the rest of the emerging countries that are seeking to reach the Fed’s tapering by offering a higher yield.
Mexico has continued to grant positive real rates among Latin American markets, after Brazil, and is the third most competitive of the world’s emerging markets, below Russia, and can gradually normalize the rate because its starting point was not so low, he stressed.
Banxico will reply to the Fed
According to the strategist, Banco de México will have to respond to the Federal Reserve before the next start of the expected rate hike in March.
He estimates that at some point in the second half of the year, Banxico will be in a position to break away from the bullish cycle, assuming that inflation will be on a downward trend and that the flow in the global supply chain begins to settle.
The strategist explains that last year, despite the beginning of the cycle of rate hikes in Mexico, capital left assuming that inflation was under pressure.