Mexico raised 2 billion euros ($2.8 billion) in its third international bond sale this year as the government looks to Europe for cheaper financing.
Mexico sold 1 billion euros of seven-year notes to yield 105 basis points, or 1.05 percentage points, over midswaps and the same amount of 15-year bonds at a 150 basis point spread. Banco Bilbao Vizcaya Argentaria SA, BNP Paribas SA and Deutsche Bank AG managed the transaction.
The Latin American country is taking advantage of demand for its debt after it passed legislation in December to end the state’s 75-year oil monopoly, earning the country its highest-ever rating from Moody’s Investors Service and helping it sell a 100-year bond denominated in pounds last month. Mexico also issued on Jan. 9 $1 billion in dollar bonds due in 2021 and $3 billion in debt maturing in 2045.
“Mexico is on an improving path,” Sergey Dergachev, who helps oversee about $10 billion in emerging-market debt at Union Investment Privatfonds GmbH in Frankfurt, said by e-mail. “EUR paper out from emerging-market sovereign issuer is very rare, and scarce, making it a great opportunity to participate in the new-issue market and get exposure there.”
Yields on 1.6 billion euros of Mexican bonds maturing in 2023, sold last year, declined to 2.88 percent today from a record 3.57 percent in September.
Moody’s lifted Mexico’s rating on Feb. 5 to A3, the seventh-highest investment grade, citing constitutional changes to open the energy industry to more foreign investment and broaden the tax revenue base. Moody’s projects the country’s long-term average growth rate will quicken to between 3 percent and 4 percent, from a range of 2 percent to 3 percent.
“Asset managers find issues like these attractive after last year’s selloff that did not differentiate between structurally and fundamentally strong issues like Mexico on the one hand and weaker emerging-market countries on the other hand,” said Bernhard Matthes, a fund manager at Bank fuer Kirche und Caritas eG in Paderborn, Germany.