A hawkish tone from Banxico could flatten the swap curve: Chart

(Bloomberg) — As pressure mounts on Banxico to step up its fight against inflation, rate swap traders are looking for further flattening of the curve. In late April, when the market priced in over a 50% chance of three 75 basis point hikes in May, June and August, the swap spread fell to -46 basis points. A more restrictive tone from the central bank on Thursday would fuel a hike in TIIE rate swaps at the short end, pushing the spread between 2-year and 10-year rates further into negative territory.

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