20180423-法国巴黎银行-LATIN_AMERICA_STRATEGY__Mexico__Non-residents_increase_exposure_in_the_long-end_12页_522kb

Summary of LATIN AMERICA STRATEGY Document

Core Content

This document outlines the current state of non-resident holdings of Mexican public debt and the pension funds' (Afores) allocation in fixed income and equities. It also discusses the Latam Strategy for interest rate and foreign exchange instruments, along with relevant market data and analysis.

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Key Market Developments

• Non-resident holdings of Mexican public debt increased by 1% month-over-month (m/m) in March 2018 to USD 115.2bn.
• The increase in nominal rate exposure was 10% in USD terms or 7.2% in MXN terms, marking the largest monthly increase since January 2015.
• The rise was driven by longer tenors (5 years and above) of the nominal rates curve, while short-end exposure decreased slightly.
• Non-residents' share of the market now stands at USD 173bn, which is 66% of international reserves.
• Mexican pension funds (Afores) remain the largest holders of real rate bonds (UDIbonos), with 50.2% of total UDIbono holdings.

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Latam Strategy Overview

• The strategy includes the following instruments:
  • Receiving 5y5y TIIE against US 5y5y swap
  • Receiving 5y TIIE against paying Colombia IBR 5y
  • Paying the belly of TIIE Fly 2Y-5Y-7Y
  • Receiving 1Y1Y TIIE

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Breakdown of Public Debt Holdings

Holder	MXN (bn)	% of Total	m/m %	y/y %	Mar-18	Apr-17
Domestic Public Debt	6,562	100%	0%	5%	6,565	6,262
Pension Funds	1,401	21.3%	0%	8%	1,400	1,296
Local Funds	747	11.4%	0%	-1%	746	751
Insurance Companies	374	5.7%	-1%	9%	377	345
Non-residents	2,114	32.2%	1%	-2%	2,088	2,163
Banxico Holdings	169	2.6%	-13%	-33%	194	253
Commercial Banks	463	7.0%	-8%	47%	505	315
Others	1,294	19.7%	3%	14%	1,256	1,140

• Non-residents have the largest exposure at USD 115.2bn, with 52.4% of exposure concentrated in maturities above 10 years.
• Mbonos (nominal rate bonds) and UDIbonos (real rate bonds) make up 46% of Siefores' fixed income allocation, with real rate exposure being nearly double that of nominal rates.

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Pension Fund (Siefores) Analysis

• Total AUM for Afores in March 2018 was MXN 3,220.75bn (USD 177bn), an 1.7% m/m increase.
• Fixed income allocation increased 2% m/m, with UDIbonos at 23% of total holdings.
• Mbonos increased 1% m/m, but remained unchanged over the past 12 months.
• Equity allocation decreased 3% m/m, reversing a trend of increasing equity exposure since 2016.
• Afores' average duration in nominal rate bonds decreased to 7.3 years, while in real rate bonds it has been reducing since 2018.

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Key Insights

• Non-residents are showing a clear preference for long-dated bonds, increasing their exposure in the long-end of the curve.
• Pension funds have been shifting from nominal to real rate bonds in response to rising inflation.
• The recent dip in inflation has not caused a significant change in pension fund exposure.
• The Latam Strategy continues to be active in the interest rate and FX markets, with a focus on TIIE instruments.

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Legal & Disclosure Notes

• This document is non-independent research and may be subject to conflicts of interest.
• It is not investment research for the purposes of MiFID II.
• It may contain "Research" as defined under MiFID II unbundling rules, and is intended for specific professional clients.
• The information is for informational purposes only and not to be relied upon as authoritative.
• No guarantees are made regarding the accuracy, completeness, or future performance of the information or strategies discussed.
• Options and ETFs mentioned are complex instruments and may involve high risk.
• Prior to any transaction, the recipient should ensure they understand all legal, tax, and financial considerations.

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Conclusion

The document highlights the increased exposure of non-residents in Mexican public debt, particularly in longer tenors, and the ongoing shift by pension funds from nominal to real rate bonds. It also outlines the Latam Strategy for managing interest rate and FX risk, along with market data and analysis. The legal and disclosure notes emphasize the non-independent nature of the research and the importance of professional judgment in making investment decisions.