📝 Lower Yields And Positioning Could Long Squeeze MXN: UBS Strategy

Banxico raised its key rate by 25bp to 11.25%, as expected. The central bank said risk for inflation is skewed to the upside while acknowledging it reduced the pace of hikes and that it would be data dependent going forward.

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It is still very early after Banxico (25bp hike as expected), but 5y TIIE was down 5bp after the decision. Lower yields mean worse carry, and if positioning is overweight again (on the move from 19.15 to 18.10), this may be enough to catalyze a squeeze on MXN longs.

- UBS Strategy