All
Outcomes
Market
Price
AI Fair
Value
Value
Edge
No change
YesNo
Decrease
YesNo
Increase
YesNo
AI Insights:
03.11 23:53 UpdatedFair Value Reasoning:
The February inflation print of 4.02% released on March 9, which breached Banxico's 4% tolerance ceiling, is a game-changer. Given that the central bank paused in February specifically to 'assess' conditions, resuming cuts immediately after headline inflation rebounded above target would severely damage its credibility. While core inflation dipped slightly (to 4.50%), the surge in non-core items (agriculture) limits policy maneuvering room. Although some banks (like BofA) maintain their cut calls, more cautious analysts (e.g., Capital Economics) suggest the window for a cut has closed. Thus, 'No change' represents the fundamental baseline, and the market's pricing of 'Decrease' (58c) is inflated by inertia.
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Arbitrage|Direct Arb
Arbitrage Plan:
Buy All options: Decrease (Yes) + No change (Yes) + Increase (Yes).
Plan Description:
There is a significant direct arbitrage opportunity. The total cost to buy 'Decrease' (58c), 'No change' (38.5c), and 'Increase' (0.15c) is approximately 96.65c. Regardless of Banxico's decision, this combination will payout 100c, locking in a risk-free profit of ~3.35c. The annualized yield is roughly 90%, which is exceptionally high for a 14-day duration.Sign up to view more information
Arbitrage: 3¢
|Annualized yield: 90.3%
Hedging
USDMXN
The Bank of Mexico's interest rate decision directly impacts the valuation of the Mexican Peso (MXN). If the outcome is unexpected (e.g., a surprise cut or hike), the USDMXN exchange rate will see significant volatility, making it a direct hedging instrument. EWW (iShares MSCI Mexico ETF) would also be moderately affected by changes in domestic borrowing costs. While the impact on global markets (DXY or US equities) is minor, this is a key risk event for Emerging Market FX portfolios.
Movers
Mar 5, 2026 - Mar 9, 2026, the price of 'Decrease' crashed from 85c to 56.5c, while 'No change' surged from 15c to 41.5c. This was caused by the release of Mexico's February CPI data on March 9, which came in at 4.02%, unexpectedly breaching the upper bound of the central bank's 2-4% target range. This shattered the strong consensus for a March cut and forced capital to rapidly hedge towards 'Hold'.
Mar 1, 2026 - Mar 4, 2026, the market experienced brief volatility, but the data release on March 9 constituted the decisive trend reversal.
Divergence
Significant divergence exists. The prediction market still prices 'Decrease' as the favorite (~58%), likely reflecting sticky forecasts from some sell-side banks (e.g., BofA). However, fundamental data (inflation breaking 4%) and warnings from other analysts (e.g., Banco Base, Capital Economics) stating that 'cutting would be a mistake' strongly point towards 'No change'. Market pricing is lagging the latest inflation shock and underpricing the central bank's need to remain hawkish amidst rebounding headline inflation.
