Mexico Extends Curve With 2040

Mexico shook the DCM markets awake Tuesday and extended its yield curve out to 2040 with a new benchmark. The $1.5bn 2040 bond priced at 99.930 with a 6.050% coupon to yield 6.055%, or 170bp over UST, the bottom of 170bp-175bp guidance. The order book reached $3bn, say bankers on the Baa1/BBB+ transaction, and it was upsized from $1bn. One banker close to the deal notes that it came just 5bp wide of a $4bn 30-year GE Capital priced the same day at 165bp over UST. However, those away from the issue found the transaction to be slightly cheap, suggesting that Mexico was paying a premium of a few basis points to reopen the market for LatAm in the prevailing hostile external market conditions. “Figuring out the premium for a relatively rare issuer like UMS is not easy,” Mexico’s head of public credit, Gerardo Rodriguez, tells LatinFinance. He adds that after discussions with investors, Mexico priced using as a reference the UMS ’34, which at the time was trading at 130bp-154bp. “We upsized to $1.5bn and still kept to the low end of guidance,” adds Rodriguez. Proceeds refinance debt, of which the sovereign has about $3.2bn coming due this year. The sale was managed by Credit Suisse and Deutsche Bank.