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Mexico taps Euro market for €2bn

Apr 2, 2014

Mexico’s bond sales in the dollar, sterling and euro markets this year have generated a lot of interest from investors

European investors snatched up Mexico's bonds on Tuesday in a transaction that allowed the sovereign to raise €2bn ($2.75bn) in 2021s and 2029s, cementing its appeal as a top emerging market investment destination.

The 2021s sold at a 2.40% yield and the 2029s sold at a 3.75% yield, while the equally-sized bonds carry coupons of 2.375% and 3.625%, respectively. The transaction was said to be 3.4-times oversubscribed, which allowed bookrunners BBVA, BNP Paribas and Deutsche Bank to tighten the spread of the 2021 bond to 105bp points from initial thoughts of 115bp, and the 2029 bond to 150bp from 160bp.

Pension funds and insurance companies were the main bidders for the 2029s, while investment funds, banks and asset managers went for the 2021s, Mexico's public credit director Alejandro Díaz de León told LatinFinance. "There was a lot of interest. This is an emerging economy with different characteristics when compared to others that have suffered volatility," he said, adding that investors are enthusiastic about structural reforms being implemented by the government of Enrique Peña Nieto.

"Mexico is becoming an emerging market darling, especially in Latin America, in part because of the reforms, but also because other economies in Latin America have problems that are relatively serious," said a US-based investor.

The sovereign tapped the sterling market earlier this month, capturing market attention with a £1bn 100-year bond - only the second of such maturity ever sold in that market. The A3/BBB+/BBB+ rated deal was the first since the sovereign was upgraded by Moody's in early February. In January, Mexico opened the dollar market for Latin American borrowers this year, issuing a $4bn dual-tranche transaction combined with a liability management exercise.

Díaz de León said Mexico does not need to tap the foreign capital markets again this year, but is on the lookout for opportunities. "A very important part of our financing needs in the foreign capital markets has already been covered, but even though we may not need more, we have our eyes open to identify opportunities," he said.



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