Mexico's CFE stumbles amid US rate volatility

martes 9 de junio de 2015 16:45 GYT

By Paul Kilby

NEW YORK, June 9 (IFR) - Mexico's CFE fell victim to US rate volatility, ambitious pricing goals and an illiquid curve Tuesday, when it was forced to make a rare reversal in guidance on a new 30-year bond.

Investors pushed back on initial thoughts of high 200s on a day that saw yields on the 30-year US Treasury spike to a seven-month high of 3.183%.

This forced leads to launch the US$700m deal at a much wider 300bp over.

"Given US rate volatility and relative spread to Pemex, syndicates needed to revise the guidance on the new 30-year transaction," said a US-based investor.

Aside from rates, confusion also arose over where the relatively illiquid bonds of the state-controlled utility should trade compared to its counterpart in the oil space, Pemex.

The oil shock earlier this year had reversed trading patterns between the two state-owned credits, leaving the defensive utility to trade inside the more volatile Pemex.

As crude prices stabilized, however, secondary levels normalized closer to where they had been with Pemex, once again starting to trade inside CFE.

However, CFE's curve remained relatively flat, which may explain why the company chose to target a long bond despite the back-up in US rates.   Continuación...