Mexico DCM Slowing Likely

Mexico’s domestic bond market could see issuance put on hold given continued market volatility, bankers say, with many waiting to see if a CFE transaction gets done today or tomorrow. “There is no clear sign but there is a possibility issuance may be delayed for another 2-3 weeks,” notes a Mexico-based banker. Last week, Pemex postponed issuance of up to MXP15bn ($1.14bn) in bonds because of poor market conditions. “Issuers may have the same mindset as Pemex,” notes a second banker. Mexican builder ICA and Mexican utility Comision Federal de Electricidad (CFE) both have plans to issue domestically this week, with CFE looking at a reopening its 2014 and 2020 bonds and Mexican builder ICA through two subsidiaries looking to issue up to MXP8.3bn ($632m) in asset backed bonds. “ICA and CFE are expected to issue to week but it has yet to be seen if it will happen,” notes a third banker. Mexico’s Banco Compartamos and Ford Credit de Mexico also have scheduled issuance for this week for up to MXP2bn and MXP1bn issuance respectively. Both issuances are floating rate bonds paying a spread over TIIE. “Everyone is waiting to see what will happen with CFE before deciding what to do next,” adds another banker. Bankers on the CFE deal expect pricing on Tuesday or Wednesday of this week. Mexican investors are keeping close tabs on US and European markets and are being selective. “There is tremendous risk aversion at the moment and we still remember Pemex and CFE bonds reaching 100bp over TIIE in 2008,” adds an investor.