(Bloomberg) — Mexico kicked off Latin America bond offerings for the year, selling a record amount of debt just as the government vows to rein in spending while grappling with a weakened peso.
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The country sold $8.5 billion in a three-part deal, according to people familiar with the matter. That’s more than half what the nation’s budget allows the sovereign to raise in hard-currency debt this year.
The sale — Mexico’s first under President Claudia Sheinbaum — comes after Mexican lawmakers passed a budget bill that seeks to reduce a fiscal deficit while also maintaining support to state oil driller Petroleos Mexicanos.
It also comes just weeks ahead of Donald Trump’s inauguration for a second term. The prospect of the Republican returning to the White House has roiled emerging-market currencies, especially the peso, as traders weigh the impact of higher tariffs on global interest rates and the US dollar.
It was the second high profile deal in developing nations of the day. Saudi Arabia, one of the largest bond issuers in emerging markets last year, is also selling eurobonds in another three-tranche transaction.
“The floodgates are open,” said Guido Chamorro, co-head of emerging-market hard-currency debt at Pictet Asset Management in London. Mexico has “large funding needs and it makes sense to issue before the new US administration takes office.”
Mexican assets took a hit last year after an overhaul of the judicial system spooked investors and as Trump vowed to impose steep tariffs on all of the country’s products.
Sheinbaum, who spoke to Trump in a November phone call, said she’s convinced a deal will be reached to avoid levies.
Still, the peso posted its worst year since the 2008 global financial crisis, while Mexico’s dollar debt handed investors an average loss of 3% in 2024, lagging an index of developing-world peers, data compiled by Bloomberg show.
“I don’t think anyone discounts the fact that Mexico has a lot of landmines to navigate around, but light positioning and good valuations led to strong demand for government paper,” said Aaron Gifford, an emerging markets sovereign analyst at T. Rowe Price in Baltimore.
New bonds
The bonds, which mature in 2030, 2037 and 2055, will yield around 170, 230 and 255 basis points over Treasuries, respectively, said the people, as pricing tightened from initial guidance.
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BofA Securities, Goldman Sachs, JPMorgan, Scotiabank and SMBC Nikko handled the deal, according to the Monday prospectus.
Mexico last sold dollar-denominated bonds about a year ago in a then-record transaction that raised a total of $7.5 billion. The nation, which traditionally taps global markets early in the year, also sold euro- and yen-denominated notes in January and August 2024, respectively.
Trump risk
On Monday, emerging-market assets climbed after the Washington Post reported Trump’s aides are discussing tariffs that would be applied only to “critical imports,” fueling bets that his tariff plans will be more targeted than previously expected.
They pared some of the advance as Trump said in a social media post the story was incorrect.
While the biggest underwriters of debt sales in Latin America are forecasting issuance will likely match the bonanza of last year, questions over the Federal Reserve’s interest-rate cuts, Trump’s return to the White House and concerns over China’s economy — plus local political risks — pose challenges to the outlook.
(Updates with deal being priced starting in headline.)
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Publish date : 2025-01-06 07:22:00
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