巴黎银行-新兴市场-宏观策略-墨西哥：养老基金、地方债务监测与定位-20181024-19页_1mb

Summary of Mexican Public Debt and Pension Fund Positioning (October 2018)

Core Content

This document provides an analysis of the positioning of non-resident investors and Mexican pension funds (Afores) in the local debt market and real rates market as of October 2018. It highlights changes in exposure, duration, and allocation across different segments of the market, including nominal and real rate bonds, as well as equities.

Key Messages

• Non-residents' holdings of Mexican public debt decreased by 1% q/q from MXN2.15tn (USD115.5bn) in October, marking a 3.5% decrease in dollar terms and a 4% decrease in local currency.
• The long-end of the yield curve (maturities above 10 years) has seen a reduction in non-residents' exposure, while shorter tenors have experienced a surge in holdings.
• Mexican pension funds (Afores) remain the most significant players in the real rates market, with their allocation broadly unchanged in the last quarter.
• Afores have shifted their equity allocation from foreign to domestic, with domestic equities increasing by 14% q/q and foreign equities decreasing by 8% in September 2018.
• Pension funds' exposure to real rates (UDIBonos) increased to USD33.5mn DV01, following a rebalancing in response to inflation dynamics.

Non-residents and Pension Funds Exposure

• Non-residents' exposure in nominal rates (Mbonos) has been increasing since January 2018, with the greatest bond exposure concentrated in the Nov-42 tenor, accounting for 17% of total exposure (USD8.1mn DV01).
• The average duration of non-residents' nominal rate holdings has remained stable at around 5 years over the past six years.
• In real rates (UDIBonos), non-residents' duration increased to 8.5 years, though they only hold 3.3% of the total UDIbono market.
• Afores' average duration in nominal bonds has fallen since 2015, but increased in 2018 to 7.6 years.
• Afores' real rate holdings account for 51.9% of the total UDIbono market, with their average duration at 7.7 years, slightly below the historical eight-year level.

Public Debt Breakdown

• Total assets under management (AUM) for Afores reached MXN3,420bn (USD182.7bn) in September 2018, up 2.9% q/q.
• Fixed income investments in Afores increased by 9% in Mbonos and 6% in UDIbonos, though the nominal rate holdings remained 13% and 25% of their AUM respectively.
• Equities in Afores' portfolio increased by 1% to USD737bn, with domestic equities rising 14% q/q and foreign equities falling 8%.
• Afores' equity share peaked at 25.6% between 2009 and 2013, but has since decreased as they increased fixed income allocation and reduced equities.

Key Trends and Observations

• Non-residents' share of Mexican local debt remains 64.87%, slightly higher than one year ago.
• The inflation path has shown a decrease, but recent inflation prints have been surprisingly high, prompting increased exposure from pension funds.
• The distribution of holdings across the yield curve has shifted, with non-residents increasing short-end exposure and reducing long-end exposure.
• Mbonos have seen a decline in non-residents' share since April 2018, while UDIBonos have remained dominant in pension fund portfolios.

Legal and Disclosure Notice

• This document is a marketing communication and not investment research under MiFID II.
• It is intended for Relevant Persons only, including Professional Clients and those with investment experience.
• No liability is accepted for inaccuracies or omissions in the information provided.
• Performance data may be based on back-testing and is not indicative of future results.
• Options and ETFs mentioned are complex instruments with high risk, suitable only for sophisticated investors.
• Confidentiality is emphasized, and the document may not be shared without prior consent.

Conclusion

The document outlines a shift in investor positioning in Mexico's debt market, particularly highlighting the reduced exposure by non-residents and the rebalancing by pension funds in response to inflation dynamics and market conditions. It underscores the importance of duration analysis and the role of Afores in shaping the real rates market. Additionally, it includes legal disclaimers and disclosure notices to ensure compliance with regulatory standards.