Mexico Joins Latin American Bond Bonanza With 50-Year Notes
(Bloomberg) -- Mexico is selling a 50-year dollar-denominated bond, joining a flurry of Latin American governments looking to lengthen their debt profiles at a time of tumbling borrowing costs.
The $3 billion offering attracted $10 billion in demand, making the deal 3.33 times oversubscribed, according to a ministry statement posted by Finance Minister Arturo Herrera on Twitter.
The deal launched at around 3.75%, down from initial price talk of about 4.15%, according to a person familiar with the matter, who asked not to be identified because they’re not authorized to speak about it. The offering will be listed in Luxembourg and Taiwan, and it follows recent bond sales from Peru and Brazil. Even a Venezuelan rum maker got in on the action with a sale of dollar-denominated commercial paper in late November.
Foreign investors are snapping up Mexican debt after the peso erased most of its 2020 losses. President Andres Manuel Lopez Obrador, a self-proclaimed leftist, has rejected the big stimulus packages pursued by many of his regional peers, a strategy that earned plaudits from investors even as it exacerbated a national recession. Mexico’s finance ministry has signaled the need to borrow more this year while pushing out the government’s debt-maturity profile.
“It’s a natural development,” said Carl Wong, the head of fixed income at Avenue Asset Management Ltd. in Hong Kong. “Given yield is trending to zero, you have to extend the maturity curve in order to get some yield.”
Investors will be keen to see whether the dual-listed sale may be a precursor for a fresh wave of borrowers heading to the Taipei Exchange to tap into the bid from life insurers looking for yield. Investors included 10 new ones, mainly Taiwan-based insurers, Deputy Finance Minister Gabriel Yorio said on Twitter.
Mexico’s sovereign spread over U.S. Treasuries has fallen to 361 basis points, the lowest in 10 months, according to data compiled by JPMorgan Chase & Co.
Tumbling yields across the region allowed Peru to sell century bonds just days after a political crisis that led to three presidents in the span of two weeks. Mexico, whose debt is listed a step lower than Peru by two of the three main rating companies, already sold 100-year notes in 2010, 2014 and 2015.
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