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Mexico looks at euros, yen for bond window — Diaz de Leon 0

Mar 10, 2014

Mexico may hit the foreign bond markets again this year if it finds a window of opportunity, the country's top credit official told LatinFinance last week. When the time comes the country might take advantage of lower borrowing costs in euros. The sovereign raised $4bn in the bond market in January, meaning it is not in urgent need of financing. Yet Mexico was on the lookout, Alejandro Diaz de Leon, the country's head of public credit, said on the sidelines of LatinFinance’s 9th Cumbre Financiera Mexicana. "We always try to find good conditions and we know that conditions in the Eurozone are attractive. The curve there is below the levels of the dollar curve," he said. Diaz de Leon said the Mexican government was not ready to talk about when it may issue bonds again, but that policymakers were also monitoring conditions in the dollar and yen markets. Moody's upgrade of the sovereign last month had helped strengthen Mexico's credentials as a leading EM destination because it came at a time when volatility was fueling investor aversion toward the sector, he said. The upgrade to A3, together with a positive outlook amid the structural reforms passed by Enrique Pena Nieto’s government, would likely translate into lower borrowing costs for Mexico. Diaz de Leon was confident that economic growth in Mexico would pick up this year, fueled by a stronger manufacturing sector in the US, a country that buys 80% of Mexico's exports. Strong fundamentals and a liquid currency market would buffer the country from further turmoil in EM countries, he added. "We're in a good position to face that volatility because of that, and also because our level of reserves and the flexible credit line that we have with the IMF," he said. Latin American countries with strong links to China would not fare as well, but should be able to cope with rising interest rates and market turbulence providing that there was not an outbreak of volatility, he said. "Insofar as there is not an abrupt slowdown in the Chinese economy, I think we'll have an orderly adjustment, but the manner in which those [China-linked] economies adapt may not be as timely or as neat," he said.

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