Mexican Economic Commentary

May 2011

The IPC index of leading issues fell 1% on May 2 to 36593 points, on volume of 167.2 million shares valued at 5.36 billion pesos ($465 million).

The Mexican peso was slightly weaker against the U.S. dollar and was quoted in Mexico City at MXN11.5140, according to Infosel, compared with Friday's close of MXN11.5100.

A poll carried out by the central bank in late April, showed consumer prices were seen rising 3.87 percent this year, down from a forecast of 3.92 percent in the previous month.

The average forecast for the central bank target interest rate during the first quarter of 2013 fell to 5.99 percent from 6.24 percent a month earlier. The Mexican central bank has kept its target interest rate steady at 4.5 percent since July 2009.

In the central bank poll, analysts expected the economy would expand 4.37 percent this year, compared with a forecast of 4.25 percent in the previous monthly poll. Mexico bounced back from recession last year, growing at its fastest pace in a decade, and the central bank has said it could grow as much as 4.8 percent in 2011.

The yield on Mexico's 10-year bonds due 2020 edged up 1 basis point to 7.22% April 27, while the yield on 28-day Treasury notes, called Cetes, was flat at 4.24%.

Unemployment in Mexico fell to 4.6% in March from 5.4% the previous month and from 4.8% a year earlier, reaching its lowest level since December 2008, according to the National Statistics Institute on April 20.

Outlook: Expect interest rates to fall slightly at the Cetes auction for May 4. US Treasury Secretary Tim Geithner is delaying pressure on the US Congress to raise the debt ceiling. This will curtail the flow of available US T-bills and bonds that compete for Mexican debt that should become more attractive.