Yearly Archives: 2011

Mexico has plans on the table to return to the Samurai market this year after successfully retapping its century bond earlier this week for another $1bn. “The idea is still on the drawing board to go to the yen market to issue a smaller size and without a guarantee,” Alejandro Diaz, the country’s head of public credit, tells LatinFinance. The sovereign has typically tapped the Samurai market using guarantees from JBIC, but has long hoped to sell plain vanilla bonds among Japanese investors. In October last year, it used a JBIC guarantee when it sold JPY150bn ($1.8bn) of 10-year yen-denominated bonds at a 1.51% yield, getting JPY300bn in demand. The borrower wants to build a long-term relationship with this investor base and intends to be a frequent issuer there. “Japanese investors value the fact that you don’t just go one day and forget about them,” Diaz adds. Mexico has yet to mandate banks, but it is looking at relatively small $500m size. With this week’s retap, the country has reached its stated goal of raising $3bn in the international capital markets in 2011 after earlier garnering another $2bn through two separate offerings. In April, it reopened its 6.05% 2040 bond for another $1bn with a record tight yield of 5.95%, while in February it retapped its 5.125% 2020s for the same amount to achieve a 4.844% yield. This week’s reopening of the century bond was priced at 96.50 to yield 5.959% or 241.8bp over US Treasuries. Books size reached around $1.8bn with 80 different accounts participating, Diaz says.

Mexico shrugged off market volatility Wednesday to print a $1bn re-opening of its 5.75% 100-year bond as it looked to lock in historically low yields on the back of a flight-to-safety rally in US Treasuries. UMS once again showed its willingness to move ahead of the LatAm pack tracking the nimbler US high-grade market which also saw a string of bond deals print yesterday. The deal’s success was all the more impressive for taking place during another punishing day for equity markets which this time were rattled by fears that France may soon fall victim to the euro-zone debt crisis. That backdrop was just too volatile for some investors who were unwilling to take on such heavy duration risk and held a bearish view on rates. “At some point in the future rates will have to move higher, so we didn’t want to take such long-term risk,” says one investor. Still a sufficient number of accounts liked the idea of locking in a relatively high yield on a solid sovereign credit especially in light of Fed chief Ben Bernanke’s promises to maintain a hands-off approach toward rates for the next couple of years. “The investment base for this product is binary; they either love it or hate it,” said one rival banker. “But if you want exposure to Mexico where are you going to get a 5.75% coupon, and when the curve is flattening people are willing to go farther along it.” The borrower also offered a fairly generous concession in price terms after coming at talk of 96.50 against an opening secondary level of anywhere between 98.00-98.50. Leads Credit Suisse and Goldman Sachs stuck to such levels after accumulating some $450m in reverse-enquiry demand over the last week and watching the book grow to $2bn before pricing at 96.50 to yield 5.959% or about 241.8bp over. One banker who spotted the bond at 99.00 bid or 5.80% saw the final concession at around 15bp on a yield basis. Having that backlog of anchor orders was seen as a sensible move and helped reduce execution risk in what has been