Mexico gives new reasons to bet on its debt

Investors who have been bullish on Mexican bonds due to the government’s fiscal austerity just had one more reason to keep their bets.

Less than a week before the beginning of the year, the Latin American nation has already covered more than half of its external financing needs by 2022 and deferred debt payments to bondholders in general through a management agreement of liabilities that, he says, have a value of $ 5.8 billion.

This provides additional security to investors who have been broadly optimistic about the nation’s debt prospects for 2022. While policymakers in countries like Brazil resorted to massive injections of fiscal stimulus amid the pandemic, the president Andrés Manuel López Obrador it curbed additional public spending.

“This helps to maintain the debt profile very comfortably“, He said Graham Stock, Senior Emerging Markets Sovereign Strategist at Bluebay Asset Management in London, which owns Mexican debt.

Mexican bonds were the favorite overweight bet for 56% of the 83 emerging market investors surveyed by Citigroup Global Markets Inc. That is the highest level of overweight for any country, followed by China, which was the 38% favorite of respondents, analysts reported Citi led by Dirk Willer in a note posted on Wednesday

In a region where dollar debt generated losses for investors in 2021, US bonds Mexico outperformed their key regional peers, including Brazil, Chile Y Peru.

While the bonds of Mexico dragged down this week by rising U.S. Treasury yields and asset shakeups as some investors switched to the Latin American nation’s new 12- and 30-year bonds, they are still seen as attractive. .

“Mexico has become a safe and almost boring country to invest in Latin America“, He said Guido Chamorro, Co-Head of Emerging Market Currency Debt at Pictet Asset Management.

The country was the first in the developing world to access international debt markets this year, selling $ 4.1 billion in new dollar-denominated bonds, as well as $ 1.7 billion in swaps for older notes due 2025 to 2025. 2051. The Government also repurchased the US $ 545 million in outstanding dollar notes due in 2023.

When carrying out the transaction, the year just started, Mexico was able to reduce the possibility of refinancing before loan rates start to rise in the United States, which will raise costs for emerging markets, including Mexico, he said Benito berber, Natixis economist.

The 10-year Treasury yield approached its 2021 high on Thursday, deepening one of the largest weekly sell-offs on U.S. government debt in years.

“It is also a way of capitalizing on the fact that macroeconomic risks are now not that high.“, He said. “In this way, Mexico can access the market relatively cheaper. If you wait, the cost could go up. “