Foreign investors registered net outflows of USD1.37bn from Mexican sovereign bonds in April, partially reversing the inflows seen in February and March. The outflows were driven by net sales of MBonos (USD0.81bn), Udibonos (USD0.42bn), and Cetes (USD0.15bn). Despite the lack of foreign appetite in April, YtD there remains a net inflow of USD0.46bn, primarily allocated to Cetes and MBonos. Offshore investors’ share in total government securities continued its long-term downward trend, and stood at 13.3% in April 2025. Their participation in MBonos held relatively stable at 29.9%, while their holdings in Cetes and Udibonos declined further, to 10.2% and 3.7%, respectively.
Among local participants, increased allocations by mutual funds and other institutional investors offset the outflows recorded by banks and pension funds. Other local investors increased their holdings of government securities by USD9.37bn, with notable inflows into MBonos (USD7.32bn) and Udibonos (USD3.57bn), partially offset by modest outflows from Bondes and Cetes. Mutual funds posted net inflows of USD5.25bn, mainly allocated to Cetes (USD2.89bn), followed by Bondes (USD1.23bn), Udibonos (USD1.08bn), and marginal flows into MBonos. In contrast, local banks recorded outflows across all instruments totaling USD6.78bn, with the largest reduction in Udibonos (-USD 2.40bn), and evenly distributed outflows from the remaining securities. Pension funds maintained their interest in Udibonos, and their exposure increased by USD1.38bn. However, they reduced their positions in other instruments, leading to an overall net outflow of USD2.11bn. Overall, local investors continued to support demand for sovereign debt amid the heightened risk aversion in April.
Despite the global risk-off environment, as noted in previous reports, investors viewed the Mexican economy as relatively well-positioned compared to other EMs. This underpinned moderate appetite for local equities. According to the IIF, EM equity markets saw USD9.5bn in outflows during April, although Mexican equities recorded inflows of USD 0.623bn. However, YtD flows remain negative at USD -1.25bn. Given the continued outperformance of the IPC into May, the positive flow dynamics seen in April could persist.
Looking ahead, with Banco de México expected to continue its easing cycle, the nominal curve may continue to outperform, particularly in the 3-7 year area, where we see more room for adjustment. Nevertheless, uncertainty about the economic cycle may continue to influence foreign appetite for local assets.