Mexico Focuses on MXP Benchmark Liquidity

Mexico’s government hopes to broaden its investor base with a new domestic debt sale mechanism designed to foster liquidity in new peso benchmarks. “It’s a good opportunity to promote the local markets domestically and abroad,” Gerardo Rodriguez, Mexico’s deputy undersecretary for public credit, tells LatinFinance. Mexico will place the debt in a similar fashion to its external bonds, ensuring critical mass at the outset that also make the bonds eligible for fixed income indices. Mexico is targeting the week of February 22 for the first sale. The debt syndication, as the process is known, will have its first test with a sale of 8% coupon 2020 bonds, which Rodriguez says should come at a size of MXP15bn-MXP25bn. In Q2, the 2020 will return to be sold through the normal method of smaller auctions, he says. A 30-year government bond should be sold via syndication in March. The plan is for the system to apply to all benchmarks, he says, though 20 and 40-year domestic bonds are not planned for this year. Mexico has named Santander, JPMorgan, Bank of America Merrill Lynch and BBVA Bancomer as managers, with Banamex, ING and HSBC co-managers. Under the current system of smaller regular auctions, the government says it takes about 4-6 months for domestic bonds to reach the MXP15bn-MXP20bn considered adequate for good secondary liquidity. Debt syndication is used in several European countries, including Spain, Italy and the UK.