CETES: the starting point of fixed income in Mexico
CETES are short-term loans you make to the Mexican government. They're the benchmark for fixed income in the country: what they are, how they're calculated and what they're for.
In fixed income you lend money and in return receive interest over a known period. It's called that because, if you hold it to maturity, you know from the start how much you'll receive. CETES (Federal Treasury Certificates) are Mexico's best-known fixed-income instrument.
What a CETE is
It's a debt security issued by the Federal Government through the Ministry of Finance, and Banxico places it in weekly auctions. Each CETE has a face value of $10 paid at maturity. You don't buy it for $10: you buy it at a discount, a little cheaper, and the difference is your gain.
Gain over the period ≈ investment × annual rate × days ÷ 360
The CETES rate is always quoted annually, even if the term is 28 days. So in 28 days you don't earn 10%, but the proportional part: 10% × 28 ÷ 360 ≈ 0.78%.
Terms and reinvestment
CETES are issued at 28, 91, 182 and 364 days (and sometimes longer). Longer terms can pay a higher or lower rate depending on what the market expects from interest rates. When they mature, you can ask for them to be reinvested automatically; that way your interest earns interest too.
| Term | Advantage | To consider |
|---|---|---|
| 28 days | You get your money back quickly and adjust fast if rates rise | If rates fall, the next rollover pays less |
| 91 and 182 days | A middle ground | The money is committed for longer |
| 364 days | You lock in the rate for a year | If you sell early, it may be worth a little less |
How safe they are
They're considered the lowest-risk investment in pesos, because they're backed by the Federal Government, which can collect taxes and issue currency. That doesn't make them perfect: their real return can be low if inflation rises, and if you sell before maturity you get that day's price. But the risk of not receiving your $10 at maturity is very low.
How to buy them
- Cetesdirecto: the government platform to buy CETES and other bonds without intermediaries, from $100 and with no fees.
- Brokerages and banks: they offer them too, sometimes along with other instruments; check their fees.
- Debt funds: funds that invest in CETES and other bonds; they offer daily liquidity but charge a fee.
What they're used for
- For the emergency fund and short-term goals, because of their low risk.
- As the stable part of a portfolio, cushioning stock market drops.
- As a benchmark: if a riskier instrument doesn't promise quite a bit more than CETES, the extra risk may not be worth it.
Taxes
CETES interest pays income tax (ISR). The institution withholds annually on the capital invested, at a rate set each year by the Federal Revenue Law, and in your annual return you report the real interest (above inflation). We cover this in the taxes lesson.
Test what you learned
1. What is the face value of a CETE paid at maturity?
- $1
- $10
- $100
Show the answer
$10. It's bought below $10 and $10 is paid at maturity.
2. A 28-day CETE pays 10% a year. Roughly how much do you earn in those 28 days?
- 10%
- 0.78%
- 2.8%
Show the answer
0.78%. 10% × 28 ÷ 360 ≈ 0.78%.
3. Who backs CETES?
- A private bank
- The Federal Government
- The Mexican Stock Exchange
Show the answer
The Federal Government. They're Federal Government debt; that's why they're considered very low risk.
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Everything in this section is educational: it explains how investing works, it doesn't tell you what to buy.