Mexico Joins Bond Sale Rush in Fresh Test for New President

(Bloomberg) -- Mexico is joining a rush of emerging-market bond issuers who are taking advantage of the optimistic mood at the beginning of the year to sell debt.

In the first global bond sale under President Andres Manuel Lopez Obrador, the country is offering $2 billion of 10-year debt to yield 185 basis points more than similar-maturity Treasuries, according to a person familiar with the matter.

The sale follows a positive reception for $17.1 billion of debt sold already this year by Indonesia, the Philippines, Saudi Arabia, Turkey and Uruguay. It also comes at an auspicious moment for Mexico, with asset prices rebounding from last year’s slump triggered by the arrival of Lopez Obrador and his decision to cancel a $13 billion airport project in Mexico City.

“The new-issue market has some pent-up supply,” said Michael Roche, a strategist at Seaport Global Holdings in New York. “Thus far there have been several high-profile sovereign deals that met with good reception.”

Lopez Obrador, who has been labeled a left-wing firebrand by his critics, reassured investors in late December with a well-received budget proposal and a deal with airport bondholders. Interest-rate spreads have narrowed globally this month as investors bid up bonds on wagers that the Federal Reserve will slow interest rate increases and the U.S. and China will reach an agreement to avoid an all-out trade war.

Mexico’s paid a smaller premium of 135 basis points over Treasuries at its last 10-year debt sale, in January 2018 under President Enrique Pena Nieto. The 50 basis point increase in borrowing costs is still less than the average for investment-grade emerging-market sovereigns during that span.

To contact the reporter on this story: Justin Villamil in Mexico City at jvillamil18@bloomberg.net

To contact the editors responsible for this story: Rita Nazareth at rnazareth@bloomberg.net, Brendan Walsh, Philip Sanders

©2019 Bloomberg L.P.