Mexican government bond yields saw a significant uptick in March, reaching 9.45% following volatility driven by geopolitical tensions. This increase comes amid a decoupling from local monetary policy, following the Bank of Mexico's initiation of a rate-cutting cycle.
Financial markets are currently demanding a higher risk premium to maintain long-term positions. Experts note that the long end of the yield curve does not depend solely on Mexico's monetary policy decisions.
“The long end of the curve does not depend solely on local monetary policy, but rather on global factors and risk premiums,” explained Yazmín Matus, Deputy Director of Debt Markets at Valmex.
According to Franklin Templeton, the rate adjustment is a response to an increase in the term premium. The market is pricing in higher inflationary risks, according to the firm's projections.
Ramsé Gutiérrez, Vice President and Co-Director of Investments at Franklin Templeton, noted that the surge in 20-year bonds is primarily due to this increase in the term premium. He warned that uncertainty regarding future inflation is influencing investor decisions.
External factors and market volatility
Rising oil prices due to Middle East tensions are playing a decisive role in this scenario. Risks surrounding the Strait of Hormuz have heightened uncertainty in energy markets.
Simultaneously, rising U.S. Treasury yields are increasing the opportunity cost of investing in emerging markets. This phenomenon is putting pressure on the competitiveness of local assets relative to U.S. rates.
Following a period of relative stability in February, with rates near 8.73%, the market shifted drastically in March. In just a few days, yields jumped from 8.79% to 9.45%.
This adjustment reflects increased risk aversion among global investors. The volatility stems from the need to compensate for uncertainty regarding growth and international financial conditions.