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 Business News | June 2005 
Nation Sells 10-Yr Bonds to Reduce Debt
 Wire services
Mexico sold 750 million euros (US920 million) of 10-year bonds, seeking to raise funds to pay debt due in 2006, when Mexicans will elect a new president.
The government sold the bonds to yield 4.31 percent, or 1.16 percentage points over the 10year German benchmark yield. The cost relative to the German notes was the lowest ever by Mexico to raise euros, said Siobhan Manning-Morden, director for emerging markets at Wachovia Corp. in New York.
President Vicente Fox reiterated last week he would raise enough money this year to cover US3 billion of foreign maturities due in 2006, to avoid an increase in borrowing costs stemming from concern the next president may boost spending and create a deficit. With Tuesday's sale, Mexico has US2.62 billion on hand to pay 2006 debt. All 2005 maturities have been already covered.
"They are being very shrewd," said Rodica Glavan, who helps manage 5 billion euros of fixed-income assets at Schroder Investment Management Ltd. in London. "Mexico has one of the most sophisticated liability management teams of all the sovereign issuers." Schroder placed an order for the new bonds, he said.
The sale of debt in euros comes as the yield on Germany's 10-year bund, the benchmark for Europe, fell to a record 3.15 percent today. The nation last tapped the debt market on May 17 with a 250 million 7-year Swiss franc note at a cost of 3 percent. Mexico pays about 9.8 percent to borrow for 10 years in pesos.
The extra yield that investors demand to buy Mexican government bonds instead of German government bonds fell to 0.898 percentage point on Monday from 1.145 percentage point. |
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