Mexico sold $1 billion of bonds due in 100 years in the longest-maturity debt issued by a Latin American country.
The government, which doubled the size of the sale from $500 million, sold the bonds to yield 6.1 percent, according to data compiled by Bloomberg. Deutsche Bank AG and Goldman Sachs Group Inc. arranged the sale. Mexico’s Finance Ministry press office didn’t return a call for comment.
Mexico is taking advantage of global investor demand for higher-yielding, emerging-market debt amid record-low interest rates in Europe and the U.S. Japan’s central bank pledged to hold its benchmark overnight interest rate at “virtually zero” and buy government bonds to revive its economy. U.S. Treasury 10-year note yields traded near a five-week low on speculation the Federal Reserve will increase asset purchases, known as quantitative easing, to bolster growth.
“Mexico is picking a good time to do it,” said David Spegel, head of emerging-market debt strategy at ING Groep NV in New York. “Rates in the U.S. are going to come down thanks to the quantitative easing. That’s why you want to hold a long-duration instrument.”
The extra yield investors demand to own Mexican debt instead of U.S. Treasuries was unchanged at 1.52 percentage points at 5:31 p.m. in New York. The gap has narrowed from 2.15 in May.
Mexico’s sale of so-called century bonds is the longest-dated debt issued by a Latin American government, according to Royal Bank of Scotland Group Plc. China sold $100 million of 100-year, 9 percent bonds in 1996, according to Bloomberg data. Emerging-market companies including Chile’s Empresa Nacional Electricidad SA and India’s Reliance Industries Ltd. have also issued the bonds.
“Mexico is definitely a trendsetter,” said Siobhan Morden, a debt strategist with RBS in Stamford, Connecticut.
Mexico sold 850 million euros ($1.08 billion) of seven-year bonds July 8 in its first European offering since 2005. It has raised $5.1 billion in international markets this year, according to data compiled by Bloomberg.
Mexico’s 100-year bond sale is “evidence of how extraordinary the demand for yield has become,” Peter Boockvar, equity strategist at Miller Tabak & Co. in New York, said in a note to clients.
Mexico’s stocks and bonds are beating the U.S. and Brazil for the first time since 2002 as growth expectations overshadow concerns about drug related violence, data compiled by Bloomberg show. Dollar debt issued by Mexico is returning 16 percent in 2010, more than the 14 percent for Brazil bonds and 9 percent for U.S. Treasuries, according to JPMorgan Chase & Co. and Bank of America Corp.
The International Monetary Fund forecasts Mexico’s economy will expand 4.5 percent this year after shrinking 6.5 percent in 2009, the biggest rebound among the world’s largest nations after Russia.
Gang violence in Mexico has killed more than 28,000 people since President Felipe Calderon took office in 2006. Eleven Mexican mayors have been killed since the start of the year.
“Given all the negative news, Mexico wants to present something positive,” said ING’s Spegel. “The ability to place a seriously long term debt instrument successfully sends a very positive signal that investors believe in the long term repayment capacity of the country.”
The IPC stock index is up 6.7 percent, compared with a 4.1 percent advance for the Standard & Poor’s 500 and 3.9 percent gain for the Bovespa.