Pemex Heads for Home

Mar 1, 2004

Taking advantage of strong domestic demand for peso-denominated paper, Mexico's national oil company launched the country's largest-ever peso bond and got bargain pricing.

Mexico's domestic bond market came of age in January when state-owned oil company Petróleos Mexicanos (Pemex) issued MP11.5 billion ($1.05 billion) in certificados bursátiles, the largest peso deal ever by a private or public sector issuer. This reopening of Pemex's debut MP6.5 billion, three-tranche bond simultaneously achieved excellent pricing and added liquidity to the three existing points on its local market yield curve. However, the bond's low price also highlighted growing frustration among Mexican pension fund managers at the low yields on Mexican triple-A securities. Some fund managers stayed away from the Pemex deal because it was priced too aggressively.

Pemex exploited the pricing advantage of issuing in pesos, instead of hard currency, just as several investment grade corporate issuers have done over the last three years. Mauricio Alazraki, head of capital markets at Pemex, says, "If...

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