Sovereign Report

Feb 1, 2003

Chile and Mexico's One-Two Punch

In early January, Mexico and Chile took advantage of pent up demand for emerging market debt to raise a total of $3 billion in the international capital markets in two days. Chile issued its largest bond to date with a $1 billion, 10-year bond. With US Treasury yields at a historic lows, coupled with Chile's A- rating, the sovereign was able to launch the bond at 163 basis points over comparable US Treasuries for a yield to maturity of 5.62%. The bonds carry a 5.5% coupon and priced at 99.091. Deutsche Bank and JP Morgan managed the sale. The government says that it will use $460 million of the bond's proceeds to finance its budget deficit and the remainder to refinance debt maturing in 2003. In April 2002, Chile issued a $650 million bond, which priced at 116 basis points over US Treasuries....

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