MEXICO CITY, April 27 (Reuters) - A probe by Mexico’s antitrust authority into alleged price manipulation in the market for government bonds is “credit negative” for banks, which are the biggest intermediaries of government paper, Moody’s Investors Service said on Thursday.
The Federal Economic Competition Commission (Cofece) launched the investigation in late October into Mexico’s nearly 100 billion peso-per-day ($5.3 billion) public debt market amid suspected breaches of competition laws by intermediaries.
Cofece did not name what institutions were being investigated, but said it was casting a wide net and could scrutinize deals dating back up to 10 years.
Commercial banks and brokerage houses are the main participants in auctions of government debt.
Mexico’s financial sector is led by global players such as U.S.-based Citigroup, Spain’s BBVA and Santander , Britian’s HSBC, as well as local Banorte . At least 30 brokerage houses as well as investment and pension funds also take part in trades.
“Trading has been an important source of earnings for Mexican banks, contributing, on average, about 10 percent of their core earnings, pre-provision, pretax income, in the past five years,” Moody’s said in a note to clients.
Following Mexico’s 2013 economic reforms, which conferred expanded powers on Cofece to fight market concentration, the commission has sought to increase competition in a country that has long been dominated by monopolies and oligopolies.
Any debt instrument issued by the federal government, states or municipalities, the state IPAB bank protection agency, development banks or state companies could come under review, Carlos Mena, a Cofece official, said last week. (Reporting by Anthony Esposito; Editing by Jonathan Oatis)