Category: Economy & Policy

BBVA Bancomer has cracked open the Mexican peso debt markets after a January lull, pricing MXP5bn in its own 2011 notes at TIIE minus 18bp. Total demand reached over MXP20.7bn, say bankers on the deal. Orders were mostly from mutual bunds and banks. Proceeds will go towards general capital purposes. BBVA ran its own books.

Mexico’s BBVA Bancomer plans to issue a 2011 senior secured bond of up to MXP5bn as soon as today. The TIIE-linked floating rate notes are rated Aa2/AAA and could provide a gauge of local debt appetite for 2008, following a lull in issuance. The issuer’s DCM desk will run the books.

An HSBC trust has sold MXP7bn in 40-year bonds at the 28-day TIIE plus 20bp. The bonds are backed by interest payments on a MXP7bn loan that Dexia made to the government of Mexico City. Demand reached MXP9bn, says a banker close to the deal. Proceeds will be used by HSBC to fund the purchase of the rights to the loan contract from Dexia, signed in August 2007, as well as the rights to receive payment on debt service. The deal is rated Aaa/AAA on a local scale, due to the fact that Mexico’s federal government guarantees the DF’s debt payments. IXE and Actinver were bookrunners on the transaction.

The Export-Import Bank of Korea has priced a MXP1.2bn 2013 floating-rate bond at TIIE plus 30bp. Demand reached MXP1.6bn, according to bankers on the A/Aa3 deal, attracting Mexican pension funds, insurance companies and mutual funds. “More foreign issuers have been coming to the Mexican capital markets, looking to diversify their investor base and obtain new cost-efficient funds,” says a banker on the transaction. Proceeds will fund general operations, including debt repayment. Merrill Lynch led the sale. The bank sold MXP1bn in 10-year fixed rate notes in October from the same shelf.

Mbonos are looking cheap when compared to TIIE swap rates, according to Credit Suisse, which recommends a trade designed to exploit the difference in funding costs in the bond and swap markets. “We think investors who do not have particular balance-sheet constraints should switch out of TIIE into funded Bono positions,” notes the shop. It says one way the relationship between the two asset groups can be understood is to calculate the spread of Mbonos to the TIIE curve and adjust it for cross-currency basis swaps. The adjustment is made because Mbonos funding rates are the overnight central bank rate of 7.5%, while TIIE swaps are determined by the floating portion of the 28-day TIIE rate, which is currently 40bp over the overnight. Citing a market consensus that TIIE will continue to hover around 40bp over the overnight rate, the shop recommends buying the apparently cheap 10-year and longer-dated Mbonos. “This situation is quite unusual by historical standards as Mbonos have usually been trading expensive to the swaps,” concludes the shop.

Cristina de Kirchner has unveiled a cabinet with few new faces, suggesting continuity with her husband’s administration. Among the secretaries who will be staying on for the next administration are Daniel Cameron for energy, Ricardo Jaime for transportation, Lisandro Salas for communications and mining, and Jose Lopez for public works. “The appointments reflect that the new administration is planning to continue the policies of the previous administration in most government areas,” notes Goldman Sachs. As for the ministry of economy, minister Martin Lousteau said in an interview last week that restructuring Paris Club debt is important but not urgent for Argentina. He also suggests that restructuring untendered sovereign debt is an unlikely scenario for 2008 or 2009. And he claims that Argentina’s inflation is under control. “Lousteau’s views, which we think represent the views of the Cristina Kirchner government, suggest that going forward there will be little change in economic policy relative to the Nestor Kirchner administration,” says Credit Suisse.

Mexican food producer Sigma Alimentos priced Thursday a MXP1.6bn 2014 bond. A MXP1bn floating-rate tranche was priced at TIIE plus 20bp, and a MXP635m fixed tranche came at 8.75%. Demand for the floating rate tranche exceeded MXP4bn, according to a banker on the deal. The subsidiary of Grupo Alfa plans to use proceeds to refinance short-term debt. Bank of America managed the sale. Also slated to price Thursday was the government of Mexico City. A MXP3.64bn in 20-year fixed and 10-year floating rate bonds was expected. Deutsche and JPMorgan managed the sale, whose books were still open as LatinFinance went to press. The remainder of notes authorized under a MXP4.5bn program is expected to be sold in an offering next week.

Mexican retailer Liverpool has priced MXP4bn in 2014 floating-rate notes at TIIE plus 4bp, the high end of an expected MXP3bn-MXP4bn range. The books were oversubscribed by 2.5x, says a banker on the deal. Liverpool will refinance debt with the proceeds. HSBC and Citi were joint bookrunners.