UMS Eyes Yen, Shuns Sterling

Mexico continues diversifying its funding base to keep options open and take pressure off the local market. It is still pursuing yen, but unlikely to tap sterling, Gerardo Rodriguez, Mexico’s deputy undersecretary for public credit, tells LatinFinance. “[Sterling] is more a corporate type of market than a market for sovereigns. We see more room for example for Pemex to tap into that market rather than ourselves,” says the official. America Movil last month priced a GBP650m 2030 at 99.003, with a 5.750% coupon, to yield 5.836%. This equates to gilts plus 165bp, the tight end of 165bp-175bp guidance, on orders of GBP1.3bn. A banker familiar with sterling says it is not attractive for UMS versus other options. “Sterling has traded fairly wide of dollars, making it a challenge to execute,” says the banker. “Mexico wants to develop markets that it can come to on a regular basis,” he adds. Rodriguez says yen and euros are top priorities for Mexico. For yen, JBIC plans to renew its guarantee program with Mexico. “We are assessing the market opportunity also on a non-guaranteed basis. It’s not very clear yet which route will be the most efficient for us to go, but we’ll continue exploring that possibility,” he adds. In general, Rodriguez says there has been a change in investor perception of Mexico. “We have seen a lot of new names especially out of Asia going into the local market over the past 2-3 months,” he adds. UMS also hopes to gain increased participation from Europe in local issuance, following inquiry about peso bonds during a recent euro roadshow, says Rodriguez. Mexico has wrapped up its $2.4bn 2010 funding target and has $1.5bn and $1.4bn due in 2011 and 2012, respectively.