One Thing the Mexican and American Governments are Both Doing

Mexico and the United States are working to refinance their borrowing. The countries are attempting to increase the average length of their debt maturities, according to Bloomberg. Mexican officials are trying to increase the liquidity of Mexican bonds. The average length of maturity of a Mexican bond increased from 6.3 in 2009 to 7.3 today. Since the year 2000, average bond maturities are up almost six years total. When a sovereign nation has a short average bond maturity, the nation is at risk for financial shocks. If a nation has a short average bond maturity, the nation must go out into the market place to purchase bonds on a frequent basis. If the global financial system is under pressure when the nation needs to purchase bonds, the nation may struggle to find financing. Particularly if that nation is a smaller emerging economy such as Mexico. Mexico's efforts to refinance its debt to longer-term rates may indicate a desire on Mexican policymakers to reduce risk exposure. This may be a global trend. Policy makers in the United States have taken a similar approach. Over the past two years, the average length of U.S. debt has risen from 4.1 years to 5.0 years. Are policy makers just trying to make amends for 2008? Or do they anticipate a meltdown in the future? If Mexico is actively taking steps to protect itself from future financial shocks, it may make the Latin American country's economy more attractive to investors. Traders looking to play Mexico might consider iShares MSCI Mexico Investment Index EWW. EWW attempts to return a value corresponding to the general performance of the Mexican economy and may rally if the Mexican economy does well in the future. During the 2008 crisis, EWW declined in price roughly 50%. With Mexican policy makers working to better insulate their economy, EWW may not decline so sharply in another crisis.