MBono Liquidity Tracker: Trading volume remains at highs in 2023
Liquidity in the MBono market measured as traded volume was higher compared to recent years. Overall, local banks remained as the main player in the market, as their liquidity metrics remained relatively high in 2023, and peaked in the 3Q. Meanwhile, local pension funds activity also improved compared to 2022. In terms of international investors, foreign trading volume and turnover metrics also picked up in 2023 and maintained their upward trend. Overall, liquidity has continued to recover with Banxico ended its hiking cycle. It is worth noting that most investor types increased their activity in higher duration, which might continue. In our view, liquidity could improve going forward on the back of less hawkish expectations.
Udibono Liquidity Tracker: Liquidity sustains its upward trend
Liquidity in the Udibono market measured as traded volume continued on an upward trend, despite the year-end sliding movement. Local banks were the most important player followed by local mutual and pension funds. Interbank traded volume increased especially in 2H23. By contrast, local pension funds liquidity metrics showed a downward trend. Finally, foreign investors continued to be a minor player in the market, but their liquidity metrics remained at high levels compared to previous years albeit with a significant drop at year-end. Their activity could drop going forward as inflation continues moderating and investors switch their activity to nominal rates.
Swaps trading volume: Liquidity in swaps boomed, mostly in IRS
Liquidity measured as traded volume maintained an upward trend last year. While it soared in 3Q23, liquidity above its historical average by year-end. Most of the activity was in the IRS market as participants were actively trading monetary policy expectations. As we are in a monetary pause, the high volume will most likely persist as the market moves to price in the easing cycle. Foreign investors were behind the 3Q liquidity peak in swaps. Liquidity by maturity was mostly focused on the 0-1Y area, but it also increased in the 2Y-4Y and 5Y-7Y sections compared to previous years. Again, trading volume is higher on expectations towards the easing cycle.