Mexico Reopens Sovereign DCM

Mexico has seized advantage of improving risk appetite to retap its 5.125% of 2020 for $1bn at a yield it claims as the lowest ever for a 10-year. Demand was about $2.5bn, slightly stronger than the $2.0bn it drew in the original January $1bn offer. The Baa1/BBB issue reopened at 100.956 to yield 5.000%, or US Treasuries plus 139bp, in line with 140bp-area guidance. Investors and bankers on and away from the deal spot the reopening premium at around 12bp, based on the bonds trading at UST plus 125bp-130bp at close Wednesday. “A window started to open in the past few days, which gave us a financing opportunity at the lowest absolute yield that we’ve been able to achieve with a new 10 year transaction,” Gerardo Rodriguez, Mexico’s head of public credit, tells LatinFinance. “This was a compelling opportunity for us to advance our funding strategy, strengthen the benchmark status of the bond, and with that be in a much more comfortable position having done two–thirds of the amount we will need for the year,” he adds. Rodriguez says Mexico was also motivated by general positive feedback from investors. The deal was said by buysiders to have been driven by reverse inquiry, with the sovereign electing to announce at $1bn “will not grow,” rather than a smaller chunk open for growth, as might be expected on a retap. “There is a better feeling in the market overall, and about Mexico,” says Edwin Gutierrez, who helps manage $5bn in EM debt at Aberdeen Asset Management. He says different sectors in the Mexican economy point to a strong cyclical rebound, and that risk aversion stemming from the Greek debt crisis is becoming more of a non-story for LatAm debt issuers. JPMorgan and Morgan Stanley managed the transaction. The bond was originally sold January 11 at 99.037 to yield 5.250%, or UST plus 142.4bp. On that deal, the new issue premium was seen as less than 8bp. BofA-Merrill Lynch and Citi managed the January deal. Bankers away from the trade are optimistic that if it trade