HSBC foresees Mexican bond contraction after bumper year

Primary issuance in the Mexican corporate bond market is expected to fall by 20% next year to MXN320 billion ($18.3 billion) as investors await the outcome of elections in Mexico and the US, Yamur Muñoz, head of capital markets at the local branch of HSBC, told LatinFinance.

“I am more concerned about the American election than the Mexican one,” since there is more clarity about the public policies of the leading candidates in Mexico’s presidential race, Muñoz said in an interview. “In the United States, anything could happen if Donald Trump returns again, and that can also affect Mexico.”

Given the risk of volatile markets next year, Mexican companies are lining up financing early, which is one of the reasons why primary issue will likely rise to MXN400 billion in 2023, up 25% from last year, Muñoz said.

“The market is very active. We are going to have a historic year,” Yamur said.

Electoral uncertainty aside, companies are also taking advantage of greater liquidity in the local currency bond market, which in some cases offers lower rates than those available in cross-border deals, he said.

As a result, some companies with AA or AAA ratings are shunning other overseas markets and raising more debt locally. This has contributed to a decline in international bond sales by Mexican corporate issuers, Muñoz said.

‘BIGGER TICKETS’

“In some way, the depth of the [local] market is a little greater because the Afores also have resources to invest and they can put bigger tickets per bond,” he said, in reference to Mexican private pension funds.

Among this years biggest local issuers are América Móvil, which sold MXN12.3 billion worth of bonds in March and went on to print sustainability-linked global notes in June for MXN17 billion.

Meanwhile, local export-import bank Bancomext raised MXN10.7 billion with sustainable bonds in October, cement producer Cemex raised MXN6 billion that same month while development bank Nafin issued MXN6.7 billion via a reopening of sustainable notes earlier this month.