Mexico's Peso Closes Stronger At MXN10.8640/Dlr; IPC Rallies

MEXICO CITY (Dow Jones)--Mexico's peso closed sharply stronger Tuesday as the local IPC stock index rallied. The peso was quoted in Mexico City as closing at MXN10.8640 to the U.S. dollar, compared with MXN10.9010 at the open and MXN10.9125 at Monday's close. The peso rallied as investors bought local currency to go bargain hunting in the local stock market. The IPC was trading 4.1% higher Tuesday after four consecutive days of losses. Expectations of weaker economic growth in the U.S. during the fourth quarter and 2008 have weighed on Mexico's financial markets in recent weeks. But Tuesday the Dow Jones Industrial Average also was trading higher, helping the local currency and stock market. The U.S. is Mexico's largest trade partner, and local financial markets often track sentiment in the U.S. There was also demand for government debt in the local bond market, pushing yields lower. The yield on 10-year bonds due in 2016 fell three basis points to 7.95%. The yield on 20-year government bonds due 2024 fell three basis points to 8%. The results of the Bank of Mexico's weekly debt auction were mixed. The yield on one-month Treasury bills, or Cetes, dropped to 7.41%, after falling 0.02 percentage point last week. The yield on 91-day Cetes rose 0.04 percentage point to 7.61%, while the yield on 175-day Cetes rose 0.03 percentage point to 7.71%.