Mexico’s TIIE Set to Rise: CS

Mexico’s TIIE rate should adjust upward to reflect lack of liquidity and higher borrowing costs in local money markets, Credit Suisse says, having a negative implication on the TIIE swap curve. Unlike Libor rates, the 28-day TIIE has been “remarkably stable,” since 2007, keeping mostly within 40bp-50bp, the shop says. Credit Suisse finds that the benchmark – reached through a poll of 15 Mexican commercial banks – is starting to show a lack of correlation with other on and off-shore rates that suggest an adjustment is likely. TIIE was at 8.68% Tuesday.