⚖️🇲🇽US-MX Spread Widens On MBonos Selloff: Cable FX Macro

• A rate divergence has widened the US-MX 10-year spread as Treasuries are bid while the Mexican equivalent is offered. This is a combination of dovish wagers on the Fed and the market reacting to the Mexican election results

• The spread is now ticking 558bps, the widest since March 2022. Looking back over the course of last year, this leaves the rate differential 3.2 standard deviations from its mean

• Offered Mexican bonos could also reflect market participants expecting Banxico to stay on hold as inflation remains high. However, the weakness in MXN and local equities point to a rise in risk premium