Mexico Dents Curve With Long Tap

Making up for some of the recent sovereign slack, Mexico has issued dollar bonds for the third time this year, raising $1bn from a reopening of its 2040. However, the extra supply caused the long end to trade off about 2 points on the day, or a widening of about 15bp, according to a trader away from the deal. Greek woes continue to pressure EM, but JPMorgan notes that Mexico’s deal actually helped drag down the whole EMBIG fixed income benchmark. The UMS reopened the 6.05% 2040s at 97.724 to yield 6.218%, or US Treasuries plus 137.5bp, in line with 135bp-140bp guidance. Investors spotted the reopening concession at about 10bp-12bp, slightly wider than the 2020 sale done in January, but a similar pickup to a 2020 reopening in March. “At about 10bp, there is a little bit of value. Mexico has outperformed peers recently,” says a New York-based EM debt investor looking at the deal. He notes that Mexico now generally trades flat to Brazil after an improvement that began last year. “They had $500m-$1bn to go to complete this year’s financing needs,” says a banker on the deal, noting that UMS had hit the 10-year space already in 2010 and detected demand at the long end. He adds that a widening in price on the day is expected with a large reopening, and should eventually normalize. The transaction drew $2.25bn in orders, according to bankers on the deal. About 140 accounts participated, including high grade and EM investors. Credit Suisse and Goldman Sachs managed the sale, rated Baa1/BBB. There is now $3.25bn in outstanding 2040s, following a $1.5bn original sale in January 2008, and a $750bn tap in September. Mexico said last month that it is also considering issuing in yen and/or euros to wrap up this year’s financing plan.