Mexico is prioritizing liability management exercises over new bond issues, the country’s head of public credit told LatinFinance in Mexico City.

“We are watching markets and we think there is some
momentum, which is contributing to the performance of our bonds,” Alberto
Torres Garcia said. “Conditions are starting to improve and going forward, we
will seek opportunities to benefit from this momentum, but in a format that
will be mainly liability management exercises in international markets rather
than a new issue.”

The sovereign had some $5bn in external
debt maturing in 2017, which Torres said was pre-paid with Mexico’s
bond market activity from last year.

Mexico has around $130m in external
market debt maturing next year along with a further $1.5bn in non-market debt
from international financial organizations. Torres said the sovereign was
unlikely to pre-pay the latter this year, due to favorable pricing terms with
those lenders.

“If we can add value to Mexico’s debt profile, we will take
advantage of market conditions,” he added. “The main driver would be constructive
conditions, where we could switch maturities to exchange part of the debt for
lower coupons or if we are able to get through to an investor base we are not
covering through other markets.”

Mexico was notably absent from the cross-border market in
January when positive market conditions propelled Latin American new
bond issues to a record high.

However, since Donald Trump’s victory in
the US presidential election in November, Mexico’s 10-year bond, or Mbono, has widened 122bp.

Torres said the cause can be attributed to several factors, including a 60bp increase in the 10-year US Treasury bond
and a further 66bp related to domestic market risk. Mexican country risk
however, has tightened 4bp.

“Mexican country risk widened by 60bp, but this has returned
to levels prior to the US election,” Torres said. “The initial concerns over
the Mexican economy have since been anchored and little-by-little, Mexico is
not feeling the worst of the outcomes that could have been perceived after the
election.”

In January of last year, Mexico raised $2.25bn in 2026 debt, then returned in June
with a ¥135bn ($1.26bn at the time) triple-tranche deal before selling $2.76bn
in August.
The A3/BBB+/BBB+ rated sovereign completed its 2016 capital markets activity in October
with a €1.9bn ($2.07bn at the time) transaction.