Foreign investors registered net outflows of USD2.39bn from Mexican sovereign bonds in May, following a USD1.37bn divesture in April, driven maninly by net sales of MBonos (USD2.78bn) and Cetes (USD0.47bn). While there were inflows in both February and March, they were only moderate, so the accumulated YtD outflows as of end-May stood at USD1.93bn from Udibonos, Mbonos and Cetes. Offshore investors’ share in total government securities has continued its long-term downtrend, now standing at 12.9% in May 2025 and their participation in MBonos has also fallen to 28.4%, with Cetes and Udibonos even further to 10.1% and 3.5%, respectively; from 33.3%, 12.4% and 3.8% just two years ago.
Among local participants, increased allocations by pension funds, mutual funds and other institutional investors offset the outflows recorded by banks. Pension funds increased their holdings of government securities by USD5.80bn, with inflows into all securities: Mbonos (USD2.12bn), Bondes (USD1.89bn), Udibonos (USD1.61bn) and Cetes (USD0.17bn). Mutual funds posted net inflows of USD1.94bn, driven by significant (USD3.79bn) net purchases of Mbonos, which were partially offset by USD2.46bn of outflows from Cetes. Other institutional investors recorded inflows of only USD0.47bn, with significant purchases of Mbonos and Bondes and important outflows from Cetes and Udibonos. In contrast, local banks recorded outflows totaling USD1.67bn, with the largest reduction in Mbonos (-USD 2.06bn). Albeit with volatility, pension funds and mutual funds remain the main buyers of sovereign bonds, and thus support demand even as foreign appetite remains subdued.
Despite the global risk-off environment, local equities saw outflows from foreign investors totaling USD1.8bn in May in spite of the outperformance of the IPC. In contrast, according to the IIF, EM equity markets saw USD8.4bn in inflows during May. YtD flows from Mexican equities are negative at USD3.063bn, as they are for all EM equity markets (-USD25.58bn).
Looking ahead, with Banco de México expected to continue its easing cycle, the nominal curve may continue to outperform, particularly around the 5Y segment, where we see more room for adjustment. Given the weakness of the DXY in a context of reduced volatility it is unlikely that the appreciation of the MXN will reverse in the short term (although our view remains cautious for the year-end figure), nevertheless, uncertainty about the economic cycle may continue to influence foreigners’ appetite for local assets.