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Mexico’s Century Bond a Sign of Bubble?

“Way down here, you need a reason to move,” begins James Taylor in his classic hit, “Mexico.” So investors must have had their reasons for making an aggressive move into the 100-year bond issued by Mexico yesterday, but the lack of clarity on those reasons is making some nervous that it is a sign we’re entering a credit bubble.

“Leakage from the Western stimulus is creeping into all areas of emerging market currencies and fixed income,” said Tim Seymour, founder of EmergingMoney.com and manager of a hedge fund focused on international markets. “I don’t think we’re in an emerging market debt bubble yet, but I am concerned.

Japan this week was the most recent example of a global central bank to proceed with quantitative easing, an extraordinary way to keep rates low by actually purchasing assets like government bonds in the open market. The trend has caused a so-called currency war according to the IMF, as rival countries see who can cheapen their foreign exchange by the greatest amount. The side effect is a steady rise in global bond prices and a drop in yields.

Mexico’s bond has a 6.1 percent yield maturing in October 2110. The bond increased today from its issue price of $94.28.

“The Mexican 100-year bond issued Tuesday provides yet the latest illustration of the effect of quantitative easing on the credit markets,” said Jeffrey Rosenberg, global credit strategist for Bank of America Merrill Lynch, in a note. “Lack of yield in risk free alternatives forces investors out the risk spectrum – either down in quality or out in maturity – in search for yield.”

In his note entitled “100 Years of Solitude,” Rosenberg says that both forces were at work here.

The Mexican stock market closed at a record high yesterday. Today, the country said inflation was below economists’ expectations, keeping a bid under bonds.

See you in Mexico in 2110.

* For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC. And don’t forget to check out Tim’s ‘Trading the Globe’ show tonight at 7:30 ET.

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Trader disclosure: On Oct. 7, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns (APA), (AAPL), (IBM), (EOG), (HES), (OIH), (OXY), (ORCL), (RSH), (UPL), (SU), (VRTS), (XBI), (RIG), (VRTS), (FTO), (PEP), (JOYG), (C); Terranova Is Long (GLD) Puts; Terranova Is Long (FCX) Puts; Terranova Is Long (JOYG) Puts; Terranova Is Long (OIH) Puts; Terranova Is Long (FFIV) Puts; Karen Finerman owns (JCG); Karen Finerman owns (GYMB); Karen Finerman owns (AEO); Karen Finerman is short (ANF); Karen Finerman's firm is long (BP); Karen Finerman's firm is long (YUM); Karen Finerman's firm is long (GENZ); Karen Finerman's firm is long S&P 500 Puts; Karen Finerman's firm is long Russel 2000 Puts; Karen Finerman's firm is short (JR); Karen Finerman's firm is short (MDY); Karen Finerman's firm is short (IWM); Karen Finerman's firm is short (SPY); Cortes Is Short (XLF); Cortes Is Short (BAC); Cortes Is Short (BIDU); Cortes Is Short Euro; Cortes Is Short Mexican Peso; Cortes Is Long German Bonds; Pete Najarian is long (AA) Calls; Pete Najarian is long (MAR) Calls; Pete Najarian is long (YUM) Calls; Pete Najarian is long (AKAM) Calls; Pete Najarian is long (BP) Calls; Pete Najarian is long (BEXP) Calls; Pete Najarian owns (BRCD); Jon Najarian Owns (BKE); Jon Najarian Owns (ZUMZ); Jon Najarian Owns (ADBE), Is long (ADBE) Call Spreads; Jon Najarian Owns (DCTH), Is long (DCTH) Call Spreads; Jon Najarian Owns (ANF), Is Short (ANF) Calls; Jon Najarian Owns (LTD), Is Short (LTD) Calls; Jon Najarian Owns (AEO), Is Short (AEO) Calls; Jon Najarian Owns (AA) Call Spreads; Jon Najarian Owns (SVNT) Call Spreads; Jon Najarian Owns (BEXP) Calls; Jon Najarian Owns (JCP) Calls

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