Mexico's Samurai bond draws praise
Sovereign's bond sale in Japan offers valuable diversification and low yields, says ratings agency
Mexico's sale of a JPY60bn ($590m) bond in the Japanese market
this week hit several debt management objectives, ratings
agency Moody's said on Friday.
||Alejandro Díaz de León, Mexico's
head of public credit
The triple-tranche Samurai transaction locked in the
country's best-ever financing rates, in any currency, in five,
10 and 20-year maturities, Mexico's head of public credit
Alejandro Díaz de León told LatinFinance
The bonds pay yields of between 0.8%, for a five-year
tranche, to 2.57% for the 20-year note.
Mexico's ability to fund at such low yields and diversify
the investor base drew praise from Moody's. Reducing the
concentration of investors by type and location mitigates the
risk of volatility in international markets, the ratings agency
The deal comes as growing participation of foreign investors
in Mexican-peso denominated bonds increases the risk of a
sudden turn in sentiment, Moody's said. Non-residents hold 40%
of Mexico's domestic government debt - up from 10% in 2007, the
"While increased foreign participation in the domestic
sovereign debt market has translated into lower borrowing
costs, it has also incorporated an element of potential credit
risk, since non-residents may be more likely to withdraw their
investments in the event of a market shock or changes in
international financial conditions," Moody's said in a report
on Friday. "However, this has yet to materialize."
Yields in Japan's local market have fallen with the central
bank's quantitative easing program, which has led to tighter
spreads on corporate bonds. Samurai bonds tend to offer higher
returns than debt from Japanese companies in the local market.
And with local yields lower than in the past, Japanese
portfolio managers are seeking out better-returning paper.
"The conditions were good to issue in the Yen market,"
Díaz de León told LatinFinance. "But
despite this situation or this window of opportunity, for us
the Japanese market is a strategic objective in the medium term
and we've been looking to cement our position in the Samurai
market for several years."
Mexico last hit the Samurai market a year ago, raising
JPY80.6bn ($822m) through a triple-tranche bond.
Díaz de León said he hoped other Mexican
corporates would follow the sovereign to the Samurai market:
"It's one of our objectives, when we build a curve in the
international markets we think that it may give access to some
corporates," he said. LF
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