Mexico’s equity market is entering a potential "risk-on" environment, with the S&P/BMV IPC Index, which tracks 36 of the country's largest and most liquid companies, climbing approximately 17% since September 2024. This bullish trend coincides with a notable decline in interest rates.
Over the same period, the Mexican Overnight TIIE Funding Rate (F-TIIE), a key short-term interest rate, has dropped by roughly 300 basis points, from 10.78% to 7.77%. This decrease in borrowing costs is one of the factors fueling investor enthusiasm for equities, which often perform well in a declining-rate environment.
The market expectation for even lower rates is strong, as evidenced by the Three-Month FTIIE futures June 2026 contract. This contract, which reflects expectations for the compounded F-TIIE between June and September 2026, recently settled at 93.2250. This price suggests the market anticipates a future rate of 6.775% (calculated as 100 - 93.2250), an even lower figure than today's rate.
In addition to declining overnight funding rates, several macro factors are in favor of the Mexican equity market, leading to the rise in bullish sentiment. Explore the macro tailwinds in an earlier research paper. Since the spring of 2025, the weakening of the U.S. dollar (USD) relative to the Mexican peso means dollar-denominated returns are higher for international investors. As the second largest economy in Latin America and one of the best performing emerging markets, Mexico is benefiting from investors looking for diversification and repositioning of equity allocations into emerging markets.
E-mini S&P/BMV IPC futures
A capital-efficient way to gain exposure to leading benchmark Mexican equities
Price returns of S&P/BMV IPC Index
|
Price Returns in MXN |
Price Returns in USD |
|
|---|---|---|
|
1 Year |
18.7% |
26.7% |
|
YTD |
25.8% |
42.4% |
Source: FactSet. Data as of September 26, 2025.
Weakening of USD relative to MXN
Gaining exposure to Mexican equities and managing risk
Given the inverse relationship between the fund rates levels and equity returns in Mexico, market participants can formulate views on equity market returns and take on appropriate risk by monitoring the direction and level of rates.
CME Group offers a range of rates and equity tools to navigate this environment and express market sentiment. E-mini S&P/BMV IPC futures provide a capital-efficient way to gain exposure to the Mexican equity market, while One-Month and Three-Month FTIIE futures enable participants to manage their short-term interest rate exposure over specific periods.
All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
