Core Viewpoint - The article discusses the evolution of Mexico's macroeconomic and debt environment, highlighting the rapid expansion of debt leading to a crisis in the 1980s, followed by gradual improvements in debt structure and management through reforms [1] Group 1: Macroeconomic and Debt Environment - In the 1970s, Mexico experienced rapid economic growth driven by oil exports and foreign investment, resulting in a significant increase in debt, with external debt exceeding 60% [1] - The debt crisis in 1982 was triggered by the oil crisis and rising U.S. interest rates [1] - By 2025, the total amount of Mexican government bonds is projected to reach 14.5 trillion pesos, with an increased proportion of fixed-rate and inflation-linked bonds, indicating a strategy for long-term, low-interest financing and inflation hedging [1] - Current economic growth is moderate, with ongoing external financing needs, and the central bank's interest rate cuts are alleviating debt burdens, leading to improved overall debt sustainability [1] Group 2: Bond Market Characteristics - Mexico's bond market is one of the most mature and internationalized fixed-income markets in Latin America, with an independent central bank implementing flexible monetary policy [2] - The country has a flexible exchange rate system, low levels of foreign exchange controls, and a well-developed infrastructure for bond issuance, trading, and settlement [2] - The legal environment aligns with international standards, and the debt management mechanism is transparent, with a continuous introduction of new bond types, such as inflation-linked and green bonds [2] Group 3: Government Bond Types and Market Development - The variety of government bonds in Mexico includes short-term discount treasury bills, floating-rate bonds, inflation-linked bonds, and savings protection bonds [3] - By September 2025, the total amount of government bonds is expected to exceed 14.5 trillion pesos, with domestic institutional investors dominating the market [3] - Investment funds have rapidly expanded, holding over 2.5 trillion pesos in government bonds, while foreign investors play a crucial role in the internationalization and pricing transparency of the Mexican bond market, currently holding about 1.76 trillion pesos in total government bonds [3] Group 4: Risks and Investment Strategies - The Mexican bond market faces multiple risks, including exchange rate, interest rate, credit, and liquidity risks [4] - Exchange rate fluctuations require reliance on derivatives for hedging, while interest rate risk is managed through duration management [4] - Credit risk management is essential due to historical sovereign credit stability, but some corporate high-yield bonds may pose credit risks [4] - Investment strategies emphasize duration management based on the yield curve, optimizing bond selection by considering credit spreads and macroeconomic data [4] - Investors are advised to diversify currency risks and include hard currency-denominated bonds to buffer against peso volatility, balancing returns and risks through a multi-dimensional asset allocation approach [4]