Mexico – the Central Bank left interest rates unchanged at 8.25% yesterday (May 16th, 2019) as expected.
CM’s view on Mexico’s bonds are neutral over the short term (0-6 months – chart 1 below) but moderately bullish over the medium term (chart 2 below).
Our short term neutral view is driven by the technical and carry considerations – the fundamentals support being constructive on the bond market.
Indeed, what is holding the bond market back is restrictive monetary policy (chart 3 below) despite low inflation (chart 4 below).
Chart 1: The short term rating for Mexican government bonds is Neutral (driven by carry, technical, and fundamental signals)
Chart 2: The medium term rating for Mexican government bonds is Moderately Bullish (driven by return and macro factors)
Chart 3: Monetary policy in Mexico is restrictive
Chart 4: Inflation in Mexico is low