The Daily Update - Mexico UK BoE

We continue to observe the political situation in Mexico with the election due 1st July, however, it is still early days and it could still evolve in a number of ways. Broadly, campaigning has not yet officially started, nor has the ruling party PRI candidate officially been confirmed but is widely expected to be Meade. The key issue is whether Meade will connect with the voter base and gain traction – he is unquestionably qualified to do the job and is perceived as honest which is important as corruption and violence are a key issue for voters. Andrés Manuel López Obrador  who stands for the AMLO party, a hard left candidate, has run before. In fact, this is his third time, he is a very good speaker, and is currently ahead in the polls. Ricardo Anaya is another candidate for the PAN party who is currently also polling ahead of Meade: the PAN and PRD and Citizens Movement parties have entered into an alliance as the ‘For Mexico in Front’ coalition, rather Trump like we think.

A Meade victory would be positive for markets as it represents no major change to policy. The AMLO candidate Obrador represents more of an unknown in terms of policies such as energy privatisation, he has not been pro-privatisation and opening up the sector. Of course NAFTA is an item for all the parties, but at this stage we do not know if a NAFTA agreement will be made before the election which could water down that particular risk.

Our Mexican sovereign and quasi-sovereign  bond holdings have held up well and the market has been very resilient.  Our positions continue to trade attractively on a credit notches basis, and offer a good level of yield. We will continue to monitor the political situation.

Closer to home, Bank of England Governor Mark Carney's comments that he and his peers can now be more conventional, inflation-fighting policy makers is being affirmed by the positive correlation between the pound and expectations for price bets. Broadly, inflation expectations and sterling are moving in the same direction reflecting a market driven by fundamentals. But what about the all-important housing market a prime driver of the UK economy in past economic experiences. A report yesterday suggests that only a third of households currently have a mortgage and the portion of fixed rate mortgages has risen to 60% and although about a fifth of mortgage holders have hardly seen a rate rise, debt has fallen on aggregate relative to income, and deposits have risen faster than income over the past decade. Therefore the impact of further BoE tightening on household cash flows may not be as pronounced as in the past.

Please read this important information before proceeding. It contains legal and regulatory notices relevant to the information on this site.

This website provides information about Stratton Street Capital LLP ("Stratton Street"). Stratton Street is authorised and regulated by the UK's Financial Conduct Authority. The content of this website has been prepared by Stratton Street from its records and is believed to be accurate but we do not accept any liability or responsibility in respect of the information of any views expressed herein. The information, material and content provided in the pages of this website may be changed at any time by us. Information on this website may be out of date and may not be updated or removed.

The website is provided for the main purpose of providing generic information on Stratton Street and on our investment philosophy for the use of financial professionals in the United Kingdom that qualify as Professional Clients or Eligible Counterparties under the rules of the United Kingdom Financial Conduct Authority (the "FCA"). The information in this website is not intended for the use of and should not be relied on by any person who would qualify as a Retail Client. Products and services referred to on this website are offered only at times when, and in jurisdictions where, they may be lawfully offered. The information on this website is not directed to any person in the United States. The provision of the information on this website does not constitute an offer to purchase securities to any person in the United States (other than a professional fiduciary acting for the account of a non-U.S person) or to any U.S. person as such term is defined under the Securities Act of 1933, as amended.

The website is not intended to offer investors the opportunity to invest in any Alternative Investment Fund ("AIF") product. The AIFs managed by Stratton Street are not being marketed in the European Economic Area ("EEA") and any eligible potential investor from the EEA who wishes to obtain information on the AIFs will only be provided with materials upon receipt by Stratton Street of an appropriate reverse solicitation request in accordance with the requirements of the EU Alternative Investment Fund Managers Directive ("AIFMD") and national law in their home jurisdiction. By proceeding you confirm that you are not accessing this website in the context of a potential investment by an EEA investor in the AIFs managed by Stratton Street and that you have read, understood and agree to these terms.

No information contained in this website should be deemed to constitute the provision of financial, investment or other professional advice in any way. The website should not be relied upon as including sufficient information to support any investment decision. If you are in doubt as to the appropriate course of action we recommend that you consult your own independent financial adviser, stockbroker, solicitor, accountant or other professional adviser. Past performance is not necessarily a guide to the future. The value of investments and the income from them may go down as well as up. An application for any investment or service referred to on this site may only be made on the basis of the offer document, key features, prospectus or other applicable terms relating to the specific investment or service.

Where we provide hypertext links to other locations on the Internet, we do so for information purposes only. We are not responsible for the content of any other websites or pages linked to or linking to this website. We have not verified the content of any such websites. Such websites may contain products and services that are not authorised in your jurisdiction. Following links to any other websites or pages shall be at your own risk and we shall not be responsible or liable for any damages or in other way in connection with linking.

By using this site, you should be aware that we may disclose any information that we hold about you to any regulatory authority to which we are subject, or to any person legally empowered to require such information.

This website uses cookies to improve user experience, by clicking the "I Accept" button below means you consent to the use of cookies on our website.