Mexico Lines Up Buyers for 30-Year Bond Issue

With its economy still struggling and its future still hazy, Mexico nonetheless succeeded in floating $1.75 billion in 30-year bonds Wednesday, in an important vote of investor confidence.

Mexico accepted offers to issue $1.75 billion worth of long-term bonds backed by the Mexican Treasury for outstanding Mexican bonds backed by U.S. Treasury securities. The latter are known as Brady bonds.

The new 30-year bonds will carry an annual coupon of 11.50%, and were priced to yield 12.40%, or 5.5 percentage points more than comparable U.S. Treasury securities.

Mexico had hoped to sell more of the 30-year bonds, but the government nonetheless was jubilant that international investors agreed to take as many as they did.

“You have to be happy as it is a very encouraging sign to be able to place a 30-year bond,” said Mexican government spokesman Alejandro Valenzuela.

“It’s not a disaster, but it wasn’t the blowout they expected,” said Robert Kowit, analyst at Federated Global Research in New York.

After the crash of the peso in December 1994 and the near meltdown of Mexico’s economy, doubts were raised about the country’s long-term potential and its ability to attract and keep investors.

Some analysts had claimed the bond deal was being forced on debt-ridden Mexican banks, but officials said the outcome of the sale proved otherwise.

“Less than 25% was taken up by Mexican banks; most of it went to U.S. institutional investors,” said Mexican Finance Minister Guillermo Ortiz.