Mexico Cuts Duration on MXP Bond Sales

The Mexican government plans to introduce several measures to prop up local markets, including reducing sales of long-term MXP bonds while boosting shorter-dated auctions, and borrowing more from multilaterals. To “mitigate liquidity problems” in the local financial markets, Mexico, as of November 4, will cut sales of 10, 20 and 30-year peso denominated bonds in the fourth quarter while increasing sales of 1, 3, 6 and 12-month bills. It also plans to borrow as much as $5bn additional from multilateral banks through 2009. Government bank savings protection agency IPAB will cut the amount of debt it issues in Q4, and the central bank will start next week a program to buy back up to MXN150bn in IPAB bonds. Finally, the central bank will also establish by November 14 an interest rate swaps program for up to MXN50bn, under which market participants can swap exposure to long-term fixed rates for floating short-term rates. Separately, pension regulator Consar has proposed allowing pension funds, locally known as Afores, greater flexibility to exceed value-at-risk limits under special circumstances.