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MEXICO: Banorte Maintaining 2s/10s Steepener in TIIE-F

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • Given the reduction in external risk premia, Banorte noted that the nominal Mexican yield curve has shifted lower by ~25bps in the last week, bolstered by Banxico’s dovish bias and improving inflation data. As a result, short-end valuations have exceeded their forecasted rate cuts for Banxico in 2025 by about 15bps.
  • Banorte’s baseline scenario does not anticipate tariffs being enacted in their most aggressive form; however, they do account for risk premia tied to potential obstacles here. This could create resistance for longer-term securities to extend recent gains. A shift of this nature would likely also exert upward pressure on the short-end, limiting the potential of Banorte’s 2s10s steepener in TIIE-F.
  • Banorte hold the trade, acknowledging the market could still strengthen its rate-cut expectations for Banxico with the short-end already expensive, while spreads against USTs remain compressed across other tenors as well. Banorte expect the 10-year Mbono (Nov’34) to trade between 9.60% and 9.90% this week.
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  • Given the reduction in external risk premia, Banorte noted that the nominal Mexican yield curve has shifted lower by ~25bps in the last week, bolstered by Banxico’s dovish bias and improving inflation data. As a result, short-end valuations have exceeded their forecasted rate cuts for Banxico in 2025 by about 15bps.
  • Banorte’s baseline scenario does not anticipate tariffs being enacted in their most aggressive form; however, they do account for risk premia tied to potential obstacles here. This could create resistance for longer-term securities to extend recent gains. A shift of this nature would likely also exert upward pressure on the short-end, limiting the potential of Banorte’s 2s10s steepener in TIIE-F.
  • Banorte hold the trade, acknowledging the market could still strengthen its rate-cut expectations for Banxico with the short-end already expensive, while spreads against USTs remain compressed across other tenors as well. Banorte expect the 10-year Mbono (Nov’34) to trade between 9.60% and 9.90% this week.