Last year was marked by significant foreign outflows from Mexican fixed income; however, as is often the case, December brought a strong seasonal reversal that extended into January. In January, foreign investors recorded inflows of USD 1.7bn, primarily focused on MBonos (USD 1.76bn), while limited appetite for Udibonos persisted, albeit with only marginal outflows (USD -0.19bn). Offshore participation in sovereign bonds edged slightly higher to 11.65%, still well below its 2015 peak of 38.9%. This rebound in flows is broadly consistent with foreign appetite for debt across other EM markets, which, according to IIF data, amounted to USD 71.4bn.
On the domestic front, local investors continued to underpin demand. Pension funds were again the primary buyers, adding USD 4.96bn to their holdings—mainly in Udibonos (USD 3.93bn) and Bondes (USD 2.06bn). Their participation in the Udibonos market has increased from 25% to 29% since the 2022 pension reform. Other local investors increased their holdings by USD 3.69bn, with strong inflows into MBonos (USD 6.75bn), partially offset by outflows from Udibonos. Local banks recorded net sales of USD 2.76bn, possibly reflecting profit-taking in MBonos (USD -4.32bn) given the rally at the start of the year. Mutual funds showed limited appetite, with net purchases totaling USD 0.14bn and a mixed allocation across instruments.
In Mexican equities, in line with the 10.2% YTD gain in the BMV IPC, foreign investors increased their positions by USD 1.46bn. The market has now recorded four consecutive months of inflows. Despite the sustained rally since early last year, foreign investors were net sellers for most of 2025. Meanwhile, IIF data reports USD 27.4bn in inflows to broader EM equity markets, consistent with the recent recovery in flows toward Mexican equities.
With only the second consecutive month of renewed foreign interest in Mexican assets, it is still too early to conclude that a sustained risk-on trend is underway. Nonetheless, the appreciation of the peso and the continued rally in local rates could continue to support foreign appetite in the near term. Greater clarity around the timing of further monetary easing and the upcoming USMCA revision will likely be key in determining whether this rebound in flows can become more durable. Meanwhile, Mexico’s domestic investor base continues to provide a strong and stable source of demand—particularly as gross public financing needs in 2026 are expected to remain lower than in previous years.