Mexico plans to sell its first euro-denominated bonds in almost three years and is offering to buy back existing debt to benefit from plunging yields.
The government will sell 10-year bonds today and buy back euro bonds due 2013, 2015, 2017 and 2020 on April 15, according to a statement on PR Newswire today. The new debt may be priced to yield about 135 basis points over the benchmark midswap rate, or 2.97 percent, according to a person with knowledge of the plans who asked not to be identified because the information isn’t public.
Mexico’s yields have plunged from around 4.3 percent, or a 180 basis-point spread, for July 2017 bonds the last time the government tapped the euro market in 2010. It joins Turkey, Ukraine and Lebanon among governments tapping the market today.
The bond in euros looks “more interesting than dollars right now because of spread pick up, but normally you also give up some liquidity compared to dollar issues,” Lars Krabbe, who manages about $3 billion in emerging market debt as a senior portfolio manager at BankInvest Asset Management in Copenhagen, said by e-mail.
The yield on Mexico’s dollar bonds due in March 2022 fell one basis point, or 0.01 percentage point, to 2.51 percent as of 8:23 a.m. in New York.
Tumbling borrowing costs are spurring governments to line up bond sales this week. Ukraine is seeking to sell 10-year dollar bonds at a yield of 7.5 percent to 7.625 percent, according to a person familiar with the sale.
Lebanon, concluding investor meetings in Beirut, is seeking to increase its 2023 and 2027 dollar notes, a person with knowledge of the offering said. Turkey is offering 30-year dollar bonds, according to another person.