Too much attention towards Mexico has focused on the potential of US tariffs. Tariffs, which by the way, have not yet happened.
For most of 2024, investors paid little attention to Mexico’s economic fundamentals
Now, attention is being paid to fundamentals.
This claim is supported by recent Mexican debt sales. At the beginning January Mexico placed 8 bn USD of debt-a good number in times.
This debt sale, or borrowing of money, went so well they decided to follow up with a Euro offering. The total Euro issuance was 2.4 billion Euro, but demand was 8 bn Euro, 3x what they wanted.
Europeans look to be falling over themselves to lend money to Mexico,
By investing in Mexican bonds, Europeans picked up about 2% in yield on the Euro currency.
Historically seen, compared to times past, when confidence in Mexico was challenged, this is a low premium, and seems to show confidence.
As noted before, until this point, Investors in Mexico have focused on potential tariffs, which kept uncertainty up.
But looking at Mexico’s fundamentals, not possible tariffs, you see a very good investment story.
As example, Mexican economic activity is trending better than market expectations. The most recent increase in economic activity was the fifth consecutive month of economic growth.
Along with positive trending economic activity, the Mexican government cut interest rates, the cost of borrowing money, for the fourth time in a row in December, and they look set to do it again in January.
Their record on inflation allows another cut. The Central Bank of Mexico has a target rate for inflation of 4.0%. The present rate is 4.21%, only .21% above. It is close.
Few countries can make this claim
Finally, the Mexican Peso.
After a horrible 2024, the peso is roughly unchanged in January.
So, steady economic growth, inflation nearing its target, a stable currency, and a potential fifth cut in interest rates have been rewarded.
A smart group of investors have noticed Mexico’s merits and bought the bonds in size.
These buyers paid little attention to the threat of tariffs, focusing on economic fundamentals instead.
We should too.
This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.
This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.
