Emerging Markets Rates and Currencies Handbook

from seven commercial banks. Mexican IRS trade according to the number of 28-day coupons in the life of the swap from 3 months up to 30 years. The nomenclature used is the number of coupons followed by x1 (times one) or “n” (28-day period). Example: 3x1 or 3n for a 3-month swap. 130x1 or 130n for a 10y swap. Booking conventions are Act/360, following business day, Mexico holiday schedule. MXN IRS can be quoted as spot with t+1 start date, IMM start, forward starting, and also as spread and fly. Market Liquidity Drivers of the short end of the curve (3n to 13n tenors) are mainly monetary policy and inflation. Monetary policy is supervised by Central Bank whose primary objective is to keep inflation near a target rate of 3% with a +1/-1 range, their main instrument for this objective is the rate target for overnight funding operations between banks. Daily volume traded in average in SEF channels is 1mm dvo1. Standard size for a spot IRS ticket is 10k dvo1. Most liquid tenors are 3m, 2y, 5y and 10y. Clearing houses: CME, LCH and Mexder (Mexican Derivatives Exchange). A typical Cross-Currency Basis Swaps (CCS) in the Mexican market involves the exchange of MXN for USD in a floating vs floating rate swap, where MXN leg is referenced to 28-day TIIE and the USD leg to the ON SOFR, both1 legs payable every 28 days. This quote represents the basis points that are used as a spread over TIIE. Main drivers are issuance of Mexican corporate and government bonds in USD, differences in funding sources, and movements in USD rates. FX Spot FX Forwards NDFs FX Options Interest Rate Swap Interest Rate Options XCCY swaps Market Overview Onshore Market        Offshore Market        Onshore Volume (MM USD Daily) 7,000 – 8,500 13,000 – 15,000 Negligible 1,000 - 1,400 75 2 30 Offshore Volume (MM 32,000 – 35,000 57,000 – 60,000 Negligible 4,500 – 5,000 500 2 50 – 70 USD Daily) Onshore Max Tenor (Or Typical Tenor T+0 1.5 years 2 years 5 years 20 years 10 years 20 years For Spot) Offshore Max Tenor (Or Typical Tenor For Spot) T + 2 2 years 2 years 4 - 5 years for longer tenors speak to traders 20 years 10 years 20 years Onshore Typical Deal Size (MM USD) 2 - 4 2 - 4 Episodic Included in offshore 40 2 10 Offshore Typical Deal Size (MM 20 - 30 50 - 100 Episodic 20 - 50 80 2 30 – 50 USD) Onshore CitiFX Pulse   ✗ ✗ ✗ ✗ ✗ Capabilities Offshore CitiFX Pulse Capabilities   ✗ ✗ ✗ ✗ ✗ Source: Citi indicative information Market opening hours and liquidity during the day Fixing