Pemex Yield Gap to Mexico Shrinks: Week Ahead

Petroleos Mexicanos’ borrowing costs relative to the Mexican government dropped by 65 percent since March and will keep falling in coming months as earnings improve, according to Citigroup Inc. and RBC Capital Markets.

The extra yield that investors demand to buy 10-year dollar-denominated debt issued by the state oil company known as Pemex instead of Mexican government bonds sank to 93 basis points, or 0.93 percentage point, from 2.65 percentage points on March 26. The gap will narrow to a range of 30 basis points to 60 basis points, the smallest since the securities were sold, said Eduardo Suarez, an analyst at RBC in Toronto.