Foreign-held Mexican debt hits post-election slump

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Friday, November 25, 2016

Foreign-held Mexican debt plummeted 11.8%, or nearly US$13bn, in the five days following Donald Trump's astonishing win in the US presidential election.

The Mexican peso's 12.7% depreciation during that period drove the sell-off which led the amount of debt in foreign hands to drop to US$95.98bn from US$108.9bn, a four-year low, according to a report from local news outlet El Financiero, which cited central bank data.

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Overall, foreign-held instruments, including peso-dominated bonds issued by the central bank, fell 0.6%.

Seeing a potential turnaround, Santander analyst Rafael Camarena said in the report that, while there has been a strong outflow, the situation appears to be settling if viewed in terms of the peso.

"The issue is that the spreads have expanded, the differences in the rates on peso-paying bonds," he said in the report. "The variable that is generating noise is the exchange rate, but typically, what happens when foreign investors see a high exchange rate and attractive spreads, they once again build their position in the market."

Concerns over potential protectionist policies from Trump have hit the peso hard, as experts and ratings agencies see Mexico as particularly exposed.

The currency took an early hit with the US election, hitting a low of 21.39 pesos to the US dollar, but has since recovered somewhat, trading late Friday at 20.65 per dollar.