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MEXICO: SocGen Recommend MXN TIIE 2y Receiver

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • SocGen believe relatively amicable trade/tariff negotiations between the Sheinbaum and Trump administrations should keep the MXN well supported, and that further peso appreciation would be contingent on an agreement that alleviates the persistent uncertainty in trade relations.
  • Market participants should closely monitor ongoing discussions surrounding the USMCA, particularly those focused on improving security measures, and addressing Mexico's imports from China.
  • From a technical perspective, SocGen highlight the MXN looks to have an attractive valuation, supported by wide real interest rate differentials compared to UST yields, high carry to vol, and still net long USD positioning among foreigners. SG anticipate that the MXN will trade in the range of 19.9 to 20.18 vs USD in the coming weeks.
  • Additionally, SocGen expect the TIIE 2s10s swap curve to remain range-bound, with a steepening bias, as Banxico is likely to cut rates by 50bp again at the 27 March meeting amid a rising possibility of a similar cut in May and US inflation data supporting low front-end UST yields. They are recommending MXN TIIE 2y receiver.
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  • SocGen believe relatively amicable trade/tariff negotiations between the Sheinbaum and Trump administrations should keep the MXN well supported, and that further peso appreciation would be contingent on an agreement that alleviates the persistent uncertainty in trade relations.
  • Market participants should closely monitor ongoing discussions surrounding the USMCA, particularly those focused on improving security measures, and addressing Mexico's imports from China.
  • From a technical perspective, SocGen highlight the MXN looks to have an attractive valuation, supported by wide real interest rate differentials compared to UST yields, high carry to vol, and still net long USD positioning among foreigners. SG anticipate that the MXN will trade in the range of 19.9 to 20.18 vs USD in the coming weeks.
  • Additionally, SocGen expect the TIIE 2s10s swap curve to remain range-bound, with a steepening bias, as Banxico is likely to cut rates by 50bp again at the 27 March meeting amid a rising possibility of a similar cut in May and US inflation data supporting low front-end UST yields. They are recommending MXN TIIE 2y receiver.