Mexico peso soars, bond yields hit low; stocks fall

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MEXICO CITY, Dec 11 (Reuters) - Mexico's peso firmed sharply on Thursday and debt yields hit their lowest in 6-1/2 months as investors bet efforts by the world's central bankers were thawing credit markets.

But the benchmark IPC stock index .MXX closed 1.3 percent lower at 21,408.35, weighed down by cement maker Cemex, worries that Washington may not help U.S. automakers, and bleak comments about the banking sector from JP Morgan's chief.

The peso <MXN=>MEX01 firmed 2.11 percent to 13.1925 per dollar at the central bank close.

South Korea's central bank cut interest rates by a record 100 basis points, making it the latest monetary authority to slash interest rates to prop up rapidly declining growth.

Central bank actions and government rescue packages around the world have restored some confidence to battered financial markets, and hard-hit emerging market currencies gained sharply on Thursday.

"With the loosening of monetary policies, the world economy will be able to recuperate further down the road," said Salvador Orozco, a currency and debt analyst at Santander in Mexico City.

In debt trading, the government's benchmark 10-year peso bond <MX10YT=RR> fell 15 basis points to 8.26 percent, its lowest since early June.

Mexico's central bank has held off on cutting interest rates as inflation is at its highest in more than 7 years. That has kept the spread between benchmark U.S. and Mexican rates at 7.25 percent, making peso-denominated assets more attractive. 

Investors remained on edge due to concerns that U.S. Senate Republicans might block $14 billion in aid that major American automakers say they need to stay afloat.

The failure of a major U.S. automaker would bode poorly for Mexico, where U.S. automakers have major operations and where vehicle and autoparts account for one-fifth of total exports.

In the equities market, shares of the world's No. 3 cement company Cemex  plunged 18.95 percent to 11.42 pesos after the company swapped less than 20 percent of nearly $420 million in commercial paper that comes due in the next four months. For more see [ID:nN11404034].

Cemex shares in New York  shed 18.66 percent to $8.63.

Financial shares on Wall Street and in Mexico sank after JPMorgan Chase & CEO Jamie Dimon said the company's December quarter was "terrible."

Inbursa  the bank owned by Mexican billionaire Carlos Slim, fell 2.61 percent to 33.64 pesos while Banorte, the largest locally owned bank, lost 3.54 percent to 21.27 pesos.

Shares in breadmaker Bimbo  were up 0.12 percent to 59.07 pesos as investors digested news this week of its purchase of a U.S. unit of George Weston