The reference rate in Mexico will continue to climb during 2022 and will close the year at 9.5 percent, which will have an impact on the financial cost of public debt, analysts estimated.
In this year’s Economic Package, a nominal average Cetes rate of 5 percent was estimated, although this forecast has already been exceeded since it is estimated that the indicator will rise at the same rate as Banxico’s reference.
Yesterday the 28-day Cetes rate stood at 7.25 percent, above the reference rate, which is at 7.0 percent, and one year later the Cetes rate stood at 8.73 percent, its highest level since 2005 .
Ernesto O’Farrill, president of Bursamérica, estimated that the forecasts for a rate hike in dollars by the Federal Reserve of the United States to 3.5 percent and the reference rate of the Bank of Mexico, which may reach 9.5 percent, are will have an additional impact on the financial cost of the debt of 371 billion pesos in the period of this year.
He specified that said estimate considers the impact on the internal debt for some 157 billion pesos and on the external debt for the equivalent of 214 billion pesos.
Janneth Quiroz, deputy director of economic analysis at Grupo Financiero Monex, agreed that the expectation they have is that the reference rate in the country will increase to 9.5 percent, which will have an impact on public debt, although he calculates it a little more moderate due to the anticipated refinancing carried out by the Treasury and the fact that a large part of the liabilities are at a fixed rate.
The specialist stressed that the financial cost of the debt for 2022 was revised upwards in the 2023 Precriteria, to 869 thousand 337 million pesos, from the 791 thousand 463 million pesos originally projected in the approved program.
On April 1, the SHCP raised its Cetes estimate from 5.0 to 6.7 for this year on average and estimated that the financial cost would rise by 77 thousand 874 million pesos.
The specialists explained that the calculations of the impact of the rates on the public debt are approximate, since the equation to estimate them contains many variables, for example, the dates and amounts of the increase in rates, the part of the public debt that affects having short-term maturities or that is agreed at a reviewable rate.
Quiroz Zamora also mentioned that the anticipated debt refinancing carried out by the government in recent months could mitigate the impact of the rate hike on the financial cost, he even indicated that this possibly explains that during the first four months of the year the financial cost presents a decrease of 0.2 percent.
O’Farril warned that there are several components that could be impacted by rate hikes, one is the debt in dollars and the debt in pesos, in turn in each of them there are liabilities at a fixed and variable rate. Also, in both there is short-term debt or upcoming maturities.
He specified that the foreign debt is approximately 200 billion dollars and about 20 percent is at a reviewable rate and that amount is what the rate could be raised to. Meanwhile, the Mexican debt bonds that could be impacted by the rate hike would add up to 3.3 trillion pesos.
Cetes, at its highest level in 18 years
Cetes yield continued to be in line with expectations of further monetary tightening in both the US and Mexico.
In this week’s primary auction, the greatest advance was registered in the 182-day Cetes, with an increase of 29 basis points to stand at 8.73 percent per year, a level not seen since November 2005. In the 350-day Cetes days the rise was 26 base points, to stay at 9.55 percent per year, a level not seen since August 2005. At 91 they rose 15 points to 8.05 percent and at 28 days they lowered their yield by 17 points to 7.15 percent per year. .
“We believe that rates will be consistent with the market’s expectation of a more restrictive stance for Banxico, discounting accumulated implicit increases of 311 basis points in the remainder of the year,” Banorte analysts said.
With information from Eleazar Rodríguez.