Tax Break For Pemex

TIIE swap rates rose for a third consecutive session, reversing the moves from last Thursday's Banxico decision and subsequently extending. USDMXN has had a notable squeeze from 19.90 up to 20.39. Desks noted real money outflows, potentially exacerbated by investors selling MXN to hedge Brazil risks due to their local market closures.

• Expiries worth mentioning: USD/MXN - Mxn19.75($785mln), Mxn20.34-35($666mln)

*News – Overnight, Finance Minister Herrera announced Mexico is preparing a significant tax break for its state-owned Pemex while the constitution blocks it from taking on debt to increase social spending during the pandemic. Herrera reiterated the government's pledge to fiscal austerity:

• "We need fiscal strength, because we're not just talking about the period of Covid, but the recovery will need an accelerated process to push it forward," he said.

Lowering the state's demands on Pemex, its biggest taxpayer, could help the oil giant reorder its finances as it struggles with a $110.3 billion debt load and issues surrounding reduced production.

*The lack of meaningful data for the rest of the week will leave local assets at the mercy of broader global themes. Wednesday 24^th February will provide us with retail sales and bi-weekly CPI.