Aggressive Bear Steepening In Local Swaps Curve, USDMXN >21.00

Mexico local swaps curve experienced aggressive bear steepening yesterday with the long end rising by over 40 basis points at it's worst point. USDMXN gained 3% yesterday as broader risk asset volatility spiked. 21.00 was tested multiple times yesterday and overnight and was enough to contain the move. However, consistent US dollar demand sees the psychological level being tested once more. These are the best levels being seen since November's US election. Having reinstated the bullish theme on a sustained break of 20.60, the pair seems likely to continue its upward trajectory above 21.00.

• *3 key local themes continue to play a part:
• A seemingly dovish central bank with the majority of board members seeing further space to potentially cut rates.
• Concerns surrounding the government's energy initiative, favouring state-run companies over private sector enterprises, potentially putting aspects of USMCA at risk.
• State aid for Pemex continuing to raise concerns that fiscal austerity efforts may be hurt.

• Pemex reports 4Q earnings and holds investor conference call at 10am local with CFO Alberto Velazquez.
• 1200GMT/0700ET Mexico Trade Balance – Expected -600 million vs prior +6.26 billion