(Updates with deal details)
By Paul Kilby
NEW YORK, Jan 13 (IFR) - Mexico on Wednesday announced its first dollar bond since January 2015 encouraged by a solid response to a 10-year bond offering by Chile a day earlier that was the first international offering from a LatAm issuer in over a month.
Like Chile, Mexico is testing waters with a relatively generous concession after releasing initial price thoughts of US Treasuries plus 230bp for a 10-year bond.
That is some 40bp wide to the existing 2025s, or the equivalent of some 35bp in new issue concession after accounting for 5bp extension to the January 2016 maturity on the new bond.
Mexico should benefit from a relatively positive tone in the broader market where US stocks were pointing to a higher open on stronger crude prices and positive trade data out of China.
While the buyside is less than enamored with emerging market credits, Mexico’s strong credit standing and rarity value should lure a decent crowd among accounts seeking yield among high-quality sovereigns.
“The market feels steady and the UMS hasn’t been in (the dollar) market for a year,” said a banker away from the deal. “Supply conditions are healthy. Yields are low and Mexico is the right place to put money to work.”
Mexico’s last dollar deal in January 2015 included a 3.6% January 2025 bond that priced at a spread of 165bp over Treasuries, and a 2046 tranche at plus 210bp.
The Latin American country is coming on the same day as AB InBev’s multi-tranche jumbo bond in the US market, which could provide a distraction for some investors.
“It is a little surprising they are doing it at the same time as InBev, but they might have felt that other issuers would be standing back today,” said a second banker away from the deal. “The market tone is decent today.”
Pricing is expected later Wednesday on the benchmark-size bond, which is being led by bookrunners Citigroup, JP Morgan and Morgan Stanley.
Leads have yet to announce a size but Mexico filed with the SEC on Wednesday to issue up to US$2.69bn of debt in the US.
Expected ratings are A3/BBB+/BBB+ by Moody‘s, S&P and Fitch. Proceeds will be used for general budgetary purposes.
On Tuesday, Chile raised US$740m pricing a 10-year bond at a spread of 130bp over Treasuries which was in line with guidance. The books on the deal were about US$2bn on Tuesday at guidance stage. (Reporting by Paul Kilby; Editing by Shankar Ramakrishnan)