Mexico logs $10 billion in foreign outflows from debt market, on track for record year

Reuters

Published Aug 13, 2021 08:48PM ET

By Abraham Gonzalez

MEXICO CITY (Reuters) - Mexico is on track to mark a second year of record foreign capital outflows from the country's sovereign debt market, with more than $10 billion having left so far.

Persistent high inflation, a fresh wave of COVID-19 and uncertainty created by government policy decisions have dampened appetite for Mexican debt.

Some 202 billion pesos ($10 billion) in capital left the market during January-July, compared to 257 billion pesos for all of 2020, central bank figures show. In July alone, the exodus hit 67.5 billion pesos.

Inflation was twice the official 3% target in April and has not eased much since, forcing the central bank to raise its key rate twice to 4.5%.

While the Mexican economy has made a recovery from last year when it contracted 8.5% due to the pandemic, that progress is now threatened by a surge in COVID-19 infections.

"(The infections) have significantly increased risk aversion in our country," said Janneth Quiroz, deputy director of analysis for brokerage Monex.

Reflecting that increase in risk aversion, the yield on Mexico's benchmark 10-year bond was 6.97% on Friday, compared with 5.30% at the end of 2020.

Analysts said some government decisions that have hit the interests of private companies, particularly in the energy sector, have also increased the perception of risk for Mexico's economy.