Mexico Tees Up 2040 Udi Sale

Mexico is preparing to syndicate a 30-year Udibono early this week. A MXP10bn-MXP15bn size is planned for the 4% coupon bond, with the high end of the volume range looking most likely, Mexico’s head of public credit Gerardo Rodriguez tells LatinFinance. “We’re seeing a healthy demand,” says the official. The existing 2035 Udibono is the benchmark, with a 25bp pickup likely for duration, he adds. Mexico hopes to raise foreign participation in local issues through the sale. Udis typically get less than 5% overseas investor interest, versus around 25% for bonos. “Inflation indexed securities are becoming more popular in the world and people are looking at ways of expressing that view,” says Rodriguez. Bookbuilding will start early this week, including the release of official guidance. The local syndication marks the second such transaction, following last month’s MXP25bn sale of 2020 bonds. The new system aims to establish large benchmark bonds instantly, instead of through several periodic smaller sales. The aim is also to broaden the investor base and make the new securities index-eligible. The same group of banks will be involved in this week’s deal, though with different roles. Banamex, HSBC, ING, and Bank of America-Merrill Lynch will manage the deal, with Santander, BBVA Bancomer and JPMorgan as co-managers. The government has also said it plans to issue a 5-year bond using the same process later in the year.