- In recent months, we have maintained our preference for the short end of nominal curves based on our view that Banxico will cut rates in 4Q23. In addition, we have remained cautious towards the belly and long end of the curve, as in our view risk premiums do not consider risks related to Mexico’s fiscal stance.
- We have previously mentioned that we see value in the 2Y/1Y TIIE slope and in the1Y/1Y vs 1Y TIIE spread, as the short end of the curve should benefit the most from the end of the tightening cycle and since the carry of such a strategy was positive. Since we published our note, the 2Y/1Y TIIE slope has increased 45bp while the 1Y/1Y vs 2Y TIIE spread has increased 66bp, both in line with our expectations.
- While we still see value in both strategies, given the inverted shape of the curve, we are shifting to a more cautious approach, as uncertainty regarding the monetary stance could trigger volatility across nominal curves. In addition