Flash Fixed Income Report /

Mexico: Feliz Año Nuevo – New bond issues

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    7 January 2020
    Published byTellimer Research

    The United Mexican States (Mexico) did not wait long to tap the international debt markets and on Monday launched:

    1. A new 10-year, US$1.75bn bond priced at T + 150 bps; and
    2. A tap on its existing US$2.104bn, 4.50% bonds due 2050 (currently seen trading at around US$108.717 (ALLQ) to yield 3.99% (G-Spread 174 bps; Z-Spread 211 bps) and whose US$800mn tap was priced at T + 175 bps.

    Mexican dollar sovereign bonds are rated A3/BBB+/BBB.

    We believe these prices are tight, but we saw good appetite from investors that seem to want to start the year with bonds that are liquid and investment-grade.

    The expected use of proceeds for these two issues are:

    1. For the refinancing, repurchase or retirement of domestic and/or external indebtedness of Mexico from time to time, including to pay the purchase price for certain outstanding notes of Mexico, which Mexico may purchase pursuant to a tender offer; and
    2. For general purposes of Mexico. 

    Originally, Initial Price Guidance was:

    • T + 180 bps for the 10-year.
    • T + 205 bps for the tap of the 2050s.

    The 20 bps tightening on the tap suggests that this was the preferred security by investors.