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UPDATE 2-Mexico eyes dollar, euro and yen debt in 2013
January 22, 2013 / 8:32 PM / 5 years ago

UPDATE 2-Mexico eyes dollar, euro and yen debt in 2013

* Mexico plans one syndicated auction of peso debt in 2013

* Might offer exchanges for higher-yield global bonds

MEXICO CITY, Jan 22 (Reuters) - Mexico plans to issue debt in dollars, euros and yen in 2013 and is also planning a large auction of five-year peso debt as it takes advantage of strong demand from global investors.

Deputy Finance Minister Fernando Aportela told reporters on Tuesday that market conditions would determine how much debt the government would issue in foreign currency within a $7 billion limit approved by Congress for 2013.

Latin America’s second biggest economy issued about $5 billion of new foreign currency debt in 2012, including a landmark unsecured yen bond worth about $1 billion. Strong demand helped Mexico clinch record low interest rates.

“One of our main goals is to consolidate our presence in the dollar, euro and yen markets,” Aportela said at a media conference in Mexico City.

Mexico sold $1.5 billion in debt on Jan. 13 by re-tapping its global bond due in 2044 at a record low yield of 4.19 percent.

The government said in a financing plan posted on its website that it might also launch debt exchanges or warrants to swap some external debt for new, lower-yielding debt. Mexico exchanged $2 billion of its global bonds in 2012.

Mexico’s financing needs for 2013, including new debt and amortizations of existing debt, will total 7.7 percent of gross domestic product, down from 8.1 percent in 2012, the plan said.

President Enrique Pena Nieto, who took office in December, passed a 2013 budget with a zero fiscal deficit, excluding debt held by state-oil company Pemex.

In 2012, Mexico’s fiscal deficit target was 0.4 percent of gross domestic product.

Mexico also plans to offer one large auction of five-year peso-denominated debt in 2013, according to the plan, as it seeks to satisfy the demands of global investors, who have piled into its local currency debt in recent years.

Mexico used a syndicate of banks to place 25 billion Mexican pesos ($1.97 billion) in five-year and 10-year debt in 2012, as well as 15 billion pesos of a 30-year bond.

The government said it could also use a syndicated auction to issue stripped 10-year inflation linked bonds in 2013.

Stripped bonds, which are used by big institutional funds, allow investors to trade the principal and interest payment components of a bond as separate securities. Mexico offered its first stripped bond auction last year.

Mexico began large syndicated bond offerings in 2010 as flows from foreign investors began to surge. The larger offerings help establish new issues as market benchmarks, while also providing sufficient liquidity to make the new issues attractive to major funds.

Solid growth, a relatively low public deficit and higher interest rates than developed markets has fueled record inflows into Mexican local-currency debt since 2010.

Foreign appetite for Mexican debt has helped Mexico extend its average maturity to eight years, compared with the average maturity of U.S. debt of 5.3 years, Aportela said.

Foreign holdings of Mexican peso debt rose more than 60 percent in 2012 to a record 1.571 trillion pesos ($123.57 billion).

For details of the financing plan, please see: pdf

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