Mexico bond opens dollar market amid slow start

Mexico bond opens dollar market amid slow start

Mexico Bonds

United Mexican States sold the first Latin American bond of the year in dollars Thursday, issuing a $4 billion dual-tranche transaction that it combined with a liability management exercise.

The trade follows international bond sales by CAF and Petrobras in European currencies. Yet overall the bond market has opened this year with more a “whimper” than a “bang”, in the words of one investment banker.

By January 10 last year, five Latin American borrowers had sold dollar-denominated bonds, LatinFinance data shows. And while there is optimism that the market will pick up as the month progresses, only one other borrower has announced a dollar bond.

Nonetheless, US employment data released Friday were “friendly” to the bond market, another banker said. The data showed a weaker job market than had been expected, which suggests the country’s quantitative easing program — which has spurred investment flows into emerging markets — could be scaled back slowly.

Mexico’s sale of a 3.5% $1 billion 2021 and a 5.55% $3 billionn 2045 bonds was heavily subscribed despite being priced at levels described as fair, but not cheap, by people following the deal.

Half of the long bond was made up of paper switched from five of the sovereign’s outstanding bonds. Those bonds had maturities between 2026 and 2040, and Mexico offered to swap them into the new instrument at a spread to the 2045.

Mexico scaled back the liability management offers, accepting just $1.5bn, to contain the size of the long bond, LatinFinance understands. LF

See full coverage of Mexico’s bond sale in LatinFinance’s Daily Brief