Cetes Yields Fall at the Start of May as Markets Price In Another Banxico Rate Cut

The drop in yields reflects expectations of looser monetary policy, though the real “cushion” versus inflation still exists at shorter maturities.

Yields on Mexico’s Treasury Certificates (Cetes) extended their downward adjustment at the start of May—a sign that the market is already factoring in the possibility of another cut to the Bank of Mexico (Banxico) policy rate. In the most recent government securities auction, short-term Cetes posted marginal declines, consistent with an environment in which monetary policy is moving toward a less restrictive phase after a prolonged period of fighting inflation.

Banxico’s target rate stands at 6.75%, and while annual headline inflation came in at 4.53% in the first half of April—above the 3% target—the price trend has shown intermittent slowdowns, even as pressure points remain in energy and food. Added to this is an external factor: rising risk aversion due to geopolitical tensions, which tends to increase volatility in commodities and the exchange rate and can complicate the path of disinflation.

In this context, 28-day Cetes were set at 6.49%, 91-day at 6.67%, the intermediate tenor around 6.75%, while the two-year instrument came in at 8.15%. The takeaway from these levels is twofold: on the one hand, the market sees room for lower rates in the near term; on the other, it demands a higher premium to commit at longer horizons given uncertainty around future inflation, growth, and global financial conditions.

For savers, the appeal of Cetes depends not only on the nominal yield, but on the real yield—meaning what remains after subtracting inflation. With annual inflation at 4.53%, a 28-day Cete at 6.49% implies a real spread of about 2 percentage points, which, while not exceptional, still offers reasonable protection for purchasing power compared with alternatives that have less transparent costs or higher credit risk.

The instrument’s mechanics keep their simplicity advantage: each Cete has a face value of 10 pesos and is purchased at a discount; at maturity, investors receive the full face value. The difference between the purchase price and the face value translates into the return. This, along with relative liquidity and sovereign backing, has made Cetes a common entry point to investing for households seeking predictability.

What Lower Yields Mean for Savings and Credit in Mexico

A gradual decline in Cetes yields often foreshadows—or accompanies—less tight financial conditions: the government can finance itself at a lower short-term cost and, in turn, other market benchmarks tend to adjust. However, the pass-through to consumer credit rates or business financing is neither immediate nor uniform, because it depends on bank competition, perceived risk, and the strength of disposable income. For savers, the main challenge is that if inflation stays above 4% and rates keep falling, the real margin could narrow; that makes it necessary to plan maturities and goals, and to recognize that the “reward” for holding liquidity in government instruments may decline.

The other angle is the yield curve: a higher level at longer maturities, like the two-year, usually signals that the market does not consider the inflation outlook—or the balance of risks—fully resolved. Factors such as energy shocks, wage pressures, or bouts of currency depreciation can reignite core inflation or slow its convergence. In Mexico, fiscal dynamics and the public sector’s financing costs also shape risk perceptions and the premium investors demand to lock up funds.

In the near term, Cetes performance will remain closely tied to Banxico’s statements and vote splits, as well as the evolution of core inflation, which is typically the most important gauge for monetary policy. If inflation eases in a sustained way and the external environment stabilizes, room for additional cuts could expand; if, instead, prices reaccelerate due to supply shocks or FX volatility, the central bank may choose to pause or slow the pace of adjustments.

In sum, the recent drop in yields suggests the market is positioning for a period of lower rates, but inflation still sets limits. For retail investors, Cetes retain their role as a low-risk instrument and a benchmark for evaluating opportunities; for the broader economy, the move points to a potential gradual easing in the cost of money—conditional on the disinflation process becoming firmly established.