- Since 2021, the migration to the overnight TIIE funding rate as a benchmark has continued to progress, though at a slow pace considering that we are approaching some deadlines. Starting in January 2024, the use of TIIE 91 and TIIE 182 as reference rates will be prohibited, and starting in January 2025, TIIE 28, the most liquid reference in the Mexican market, will disappear.
- In 2021, the federal government started to issue the new Bondes F and Bondes G (ESG), which use the overnight TIIE funding rate as a reference. The net issuance of these new bonds has represented nearly 60% of the total issuance in local currency since 2021. Indeed, Bondes F/G’s share of total outstanding government securities has increased over the last few years, and is currently almost 17%.
- Bondes F’s quoted margin has shifted in reaction to the current tightening cycle. As we mentioned in our latest Asset Allocation update, the scope for an additional adjustment is tighter, and thus we are maintaining our neutral stance in Bondes F.
- In 2022, corporates started to issue bonds referenced to the overnight TIIE funding rate. However, their operability and liquidity has not progressed, given the size of the market. The corporate sector no longer issues bonds referenced to TIIE 91 and TIIE 182. However, instruments having the TIIE 28 as benchmark are still issued as the deadline to stop using it is in 2025, but also because the market for overnight TIIE funding is still illiquid.
- Overall, the transition to a new reference rate is still a work in progress. Deadlines are looming and liquidity for the overnight TIIE funding should start to increase going forward. In order to develop this market in the future, more participants and bigger issuances are needed and so there is urgency for a joint collaboration between corporates, the banking sectors and regulatory agencies.