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Mexico moved to inject cash into its credit-squeezed financial markets on Thursday, saying it will buy back $3 billion in 10- to 30-year fixed rate government bonds.
The Mexican peso has lost more than 25 percent of its value since August, causing companies including Comercial Mexicana, a supermarket company that operates the Costco chain in Mexico, to post huge losses on currency bets. These bets have further squeezed credit markets that were tightening as foreign investors pull assets out to cover losses at home.
The Treasury Department said Thursday it will buy back bonds early, "strengthening liquidity in the financial market."
The Mexican stock market's key IPC index rallied 4.5 percent to 20.025 in mid afternoon trading, and the peso strengthened to 12.7 to the dollar on the news.
Earlier Thursday, the central bank offered $400 million in foreign reserves at three separate auctions, but failed to garner any bids, an indication that the peso may be stabilizing after reaching a record low of more than 14 to the dollar recently.
Mexico has made other moves to improve liquidity this week, saying it would buy back as much as 150 billion pesos ($18 billion) in government debt related to a 1990s bank rescue, reduce sales of other long-term bonds and offer 50 billion pesos ($3.7 billion) in interest-rate swaps for Mexican companies struggling with debt.
Mexico also is being helped by a "swap" accord with the U.S. Federal Reserve, which offered $30 billion in credit to the central banks of Mexico, Korea, Brazil and Singapore.
Bank of Mexico President Guillermo Ortiz said Mexico was not immediately planning on using the funds.
