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Mexico sets $18 billion debt buyback, cuts bonds

Mexico sets $18 billion debt buyback, cuts bonds

Mexico's central bank announced a plan Monday to shore up domestic financial markets by buying back as much as 150 billion pesos ($18 billion) in government debt related to a 1990s bank rescue and obtaining $5 billion in financing from international organizations.
It will also cut the number of long-term government bonds offered for sale.
The Bank of Mexico will offer a 50 billion peso ($3.7 billion) program of interest-rate swaps for Mexican companies to help them obtain more flexible short-term rates for longer-term debts and payments.
The government will also request $5 billion in additional outside financing from the World Bank and the Inter-American Development Bank to recharge government reserves.
Mexico's peso has been battered in recent weeks, and the central bank has sold about 15 percent of its foreign currency reserves to boost the currency.
Central bank Gov. Guillermo Ortiz lashed out at U.S. economic policies on Monday, suggesting they contributed to Mexico's falling stocks, the wobbling peso and a debt crisis that has hit Mexican firms.
"They did a bad job at handling the crisis, a bad diagnosis," Ortiz told a local radio station. "I think there was complacency on the part of U.S. authorities and in the developed countries, and they committed fundamental errors."
In a statement, the central bank noted that exchange rates and stock values "have suffered greater volatility in recent days." The bank added that it has designed a package of actions "aimed at reducing liquidity problems, with the aim of re-establishing the orderly working of financial markets."
Those moves include reducing auctions of long-term, fixed-rate bonds in favor of offering more shorter-term Treasury bonds in maturities of one year or less.
The bank also announced rules allowing Mexican banks leeway to use their investment funds to buy and sell government securities, to provide a better mix for their portfolios.
Ortiz said it was unfair that Mexico is suffering because of what he predicted will be "a severe contraction" in the world economy as the result of a crisis that began in the United States.
"Oddly, the country that provoked all this continues to be the country of refuge in times of financial panic," Ortiz said.
"This is, in a way, one of the injustices of this whole episode," he said, "that not just Mexico but most of the emerging nations have done a good job _ have learned the lessons of past crises, have good macroeconomic foundations _ and are being affected by all this."
The Mexican peso traded at 13.4 to the dollar on Monday.
The bank has been offering $400 million in reserves at auction each day at the previous day's closing price plus 2 percent, drawing bids only when the peso's losses exceed the difference. Monday's auction failed to generate enough bids.
The central bank has sold about 15 percent of its foreign currency reserves to boost the sagging peso.
The stock market's benchmark IPC index closed down 0.65 percent at 16,868 on Monday.


Updated : 2020-11-30 07:07 GMT+08:00