Liquidity, Macro Tailwinds to Push Mexico DCM

With domestic liquidity growing and a favorable macro environment in the forecast, Mexican DCM bankers expect an increase in local bond issuance in 2013. So far this year, issuers have raised more than MXP207.0bn ($16.2bn) domestically, up from the MXP152.0bn seen in 2011, according to LatinFinance data, which excludes short-term issuance. Mexican financial institutions and government-related issuers are expected to account for a lot of the activity next year, with securitizations in particular already building up from a backlog at the end of this year. “Given stability in Mexico’s local market and low global rates, we feel that it is a good time to take advantage of those low rates,” says a Mexico City-based DCM banker. For Mexican corporate borrowers, especially those that fall within the AAA-rated category, spreads continue to look more favorable, remaining stable or tightening, he notes. Significant corporate refinancing needs will also be a factor driving volume. Low costs should continue to pave the way for high-quality issuers, says a Mexican portfolio manager, highlighting that development banks Nacional Financiera (AAA) and Banobras (AAA) were seen printing as little as 50bp over the Mexican sovereign. He adds that he would like to see more paper from the financial sector in 2013, as well as ABS, highlighting the state of Veracruz’s November sale as a standout this year. More securitizations are planned, bankers say, though they note that spreads widened in 2012 for ABS deals, given the number of sizeable securitizations that emerged over a short period of time towards the end of the year. “The Veracruz transaction was important and could pave the way for additional Mexican states that need to refinance bank debt,” says a banker away from it. The state sold a MXP4.86bn three-tranche securitization of future federal payment flows, with a partial guarantee from Banobras, and other states may follow. Bus operator IAMSA and the Monterrey-Saltillo toll road conc