Mexican bonds fall on rate-hike worries, US fears

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MEXICO CITY, July 31 (Reuters) - Mexican bonds fell on Thursday on concern that the central bank may further tighten borrowing costs and after weaker-than-expected U.S. growth data pushed global investors to sell emerging market assets.

The government's benchmark 10-year bond MX10YT=RR fell 0.537 of a point to bid 92.297, pushing its yield up 9 basis points to 8.97 percent.

The IPC stock index .MXX rose 0.10 percent to 27,501.02 points, supported by bargain-hunting investors after the IPC lost more than 6 percent this month on worries about the economy in the United States, Mexico's top trading partner.

The peso MXN=MEX01 weakened for the first time in four days, slipping 0.01 percent to 10.044 per dollar.

The currency has been trading near its strongest level in more than five years amid support from the attractive spread between Mexican interest rates and U.S. Treasury yields.

Hurting bonds, Mexico's central bank warned on Wednesday that inflation will be much higher over the next two years than previously forecast.

"There is a lot of uncertainty about what will be the tendency in inflation," said Victor Ceja, an analyst at Valmex brokerage in Mexico City.

The central bank has raised its benchmark interest-rate borrowing costs -- now at 8 percent -- twice since June, and some investors expect it to hike again as soon as its August policy meeting.

"There could be one more hike," Ceja said.

Concerns about the health of the U.S. economy also hurt Mexican bonds, traders said, as global investors sold emerging market assets for more secure investments.

Emerging sovereign debt spreads across the globe widened on Thursday and U.S. Treasury prices rose after second-quarter growth data in the United States missed analysts' estimates and revised statistics showed its economy actually shrank in the fourth quarter of 2007.

The spread between the Mexican 10-year bond and its U.S. counterpart US10YT=RR, a gauge of investors' aversion to risk, jumped 18 basis points.

In stock trading, shares of retailer Elektra (ELEKTRA.MX) rose 3.03 percent to 397.93 pesos.

Conglomerate Grupo Carso (GCARSOA1.MX), which groups Mexican tycoon Carlos Slims industrial and retail holdings, gained 3.01 percent to 43.84.

Among losers, shares of Cemex (CMXCPO.MX) fell 2.2 percent to 21.38 pesos as investors worried about the weakness of the housing sector in the United States, its top market. On the New York Stock Exchange, Cemex (CX.N) shed 2.57 percent to $21.26. (Reporting by Michael O'Boyle; Editing by Jan Paschal)