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Richard:
I'd agree with your analysis. The one opportunity would be companis that have
assets coming and going...they can then leg or unleg hedges and take advantage
of the rates as they choose and/or to suit the 'gaps' in their forward swap
exposure.
Best,
Tim Morge
colgar@xxxxxxxxx wrote:
>
> I'm not too familiar with the specifics of the Mexican market but I've
> arbed foreign rates starting 17 yrs ago. While there may be an
> arbitrage opportunity, if you invest in CETES *and* hedge the foreign
> exchange exposure, the cost of the hedge (if priced properly, ie no arb
> possible) will wipe out any gain from investing in the CETES to begin
> with.
>
> You're asking a counterparty to buy back your Mexican Pesos at the end
> of the term. To lay off the risk, some players will, theoretically at
> least, borrow Pesos and sell them in the spot market and invest the US
> dollars. Borrow say at 21%, lend or invest at say 5% and the
> difference, say 16% becomes the futures (or forward) contract "cost"
> over the spot market wiping out your risk-free profit. No free lunch
> sorry.
>
> Unless... when things move quickly, they tend to get a little out of
> whack and arbitrage opportunities exist. This type of arb separates the
> Quick and the Dead. Not for just anyone.
>
> I hope I've been useful.
> Richard.
>
> Randall Kurzon wrote:
>
> > Anybody looked at Mexican CETES yielding about 21% as an investment
> > vehicle? Possibly hedging the position with Peso futures?
> > Comments/ideas?
> >
> > Regards, Randall
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