BBVA adapts to changing environment in Mexico

BBVA has traded approximately MXN150 billion (US$8.2 billion) in notional of structured products for Mexican investors for the past 12 months.

Activity on the rates side has slowed this year as the market transitions to F-TIIE and rates continue to trend lower - Carmen Lucia Gonzalez

Two thirds of the flow, or MXN100 billion, comes from dual currency notes with maturity of seven to 14 days, while the remainder was collected by equity-linked warrants which have doubled their sales volume since 2024.

Dual currency notes constitute the majority of Mexico’s structured notes, locally referred to as ‘bonos bancarios’, which are targeted at private banking and high net worth clients.

The Spanish bank's onshore entity BBVA Mexico acts as the issuer and hedge provider of these notes - these products are primarily sold to its private banking group which  adopts a closed architecture model. 

While foreign exchange (FX) pairs, notably USD/MXN, remain the most favoured underlying assets, Mexican investors have shown less appetite for structured notes tracking interest rates amid the country’s transition to the new Bank of Mexico overnight TIIE funding rate (F-TIIE).

“Activity on the rates side has slowed this year as the market transitions to F-TIIE and rates continue to trend lower, creating a bit more uncertainty,” said Carmen Lucia Gonzalez (pictured), head of investment solutions sales for Mexico. “In this context, we have been cautious and are letting the market adjust to the new F-TIIE framework.”

The Mexican central bank has issued a waiver that permits an additional one-year period for trading 28-day TIIE contracts that expire by the end of 2025.

Warrants

The other sizable segment for structured products in Mexico is equity-linked warrants where BBVA Mexico is the dominant provider. These are fully funded products, unlike traditional warrants which are essentially securitised option widely seen in Spain.

“There’s been a shift of demand from traditional deposits to equity-linked products this year as investors look for higher yield in a lower rate environment. Meanwhile, investors have adopted a prudent approach in selecting the underlying assets,” said Gonzalez.

Mexico’s policy rate has trended downward since February 2024 when it was 11.25%, currently staying at 7.5% following a 0.25% cut in late September 2025. 

In Mexico, these warrants are listed on the Bolsa Mexicana de Valores featuring a more favourable tax treatment to access exposure to equity exchange-traded fund (ETF) and single stocks compared to structured notes.

“Autocallable and buffered structures have gained traction to generate higher yield while offering partial protection,” said Gonzalez, adding that call spread and twin win are typical payoffs for fully principal-protected warrants in the country.

BBVA Mexico is looking to design more conservative structures and make them available for the lower segments of its private banking clients as well as tailored and yield-enhancement products for UHNW clients. 

In addition, Gonzalez and her team are focusing on diversifying underlying exposures based on the bank’s research despite US tech stocks remaining the most sought after underlyings by Mexican investors. It has started to offer more products on Mexican stocks from September as US stock market extends its rally, making the entry barrier prominent.  

Victoria Garcia-Rubiales (right), head of investment solutions sales for US & Latin America, added that dual currency notes are also offered by BBVA to offshore clients at large private banks through a few multi-issuer platforms in the US.

“They are primarily linked to the USD/MXN and EUR/USD while some are used more tactically,” she said.

These products contribute to around 10% of the total structured products notional traded by BBVA in the Americas on an annualised basis, driven by rollover money, said Garcia-Rubiales.

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