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UDIBONOS is a type of government paper that is a federal development bond of the Mexican government, denominated in inflationary investment units (Unidades De Inversión, UDI), issued by the Bank of Mexico (Banco de Mexico, Banxico - Central Bank of Mexico).
The Bank of Mexico calculates UDI based on the 2-week inflation index and 15-day CPI change and consistently predicts the UDI level for the next 15 days, publishing the calculations on the 10th and 25th of each month.
This type of asset can be used as a medium or long-term investment. Also, UDIBONOS is used by institutional investors, such as insurance companies or pension funds, as it allows citizens to increase their savings in real terms.
This type of government securities contains the following features:
1. The par value of such securities is 100 UDI.
2. These bonds can be issued for any period, divisible by 182 days. Currently, the most popular issues are equal to 3, 5, 10 and 30 years.
3. The income received from these bonds protects investors from inflation by paying income in real terms every six months based on a real fixed interest rate, which is determined on the date of issue of each security.
4. As a predominantly long-term instrument, this type of bonds is subject to the probability of a sharp market correction and liquidity problems.
Examples of such bonds: Mexico, UDIBONO 4.5r 22nov2035, Mexico, UDIBONO 4r 3nov2050