The Mexico government’s recent 50-year bond issuance may offer an attractive, long-term interest rate alternative intended to maintain investor confidence and reinforce the country’s capital inflows and liquidity, according to a new AM Best commentary.
The Best’s Commentary, "Mexico Double-Lists Bond Issue to Bolster Capital Inflows, Liquidity, Investor Confidence," notes that the Mexico government’s foreign-currency bond issuance was double-listed in Taiwan and Luxembourg, and demand has pushed the offering to USD 10 billion with a 3.75% coupon. It is intended to cover 35% of the country’s foreign currency financing requirements in its 2021 budget, while increasing diversification of its investor base and funding sources.
Institutional investors, mostly Taiwanese insurance companies with long-term investment strategies, have listed almost half the issuance. According to the commentary, Taiwan-based insurers have limited foreign-currency exposure, primarily driven by local regulatory requirements; as a result, companies have struggled to adopt suitable investment strategies beyond U.S. Treasury bills and Taiwanese government debt instruments. Taiwan-based life insurance companies that are facing declining fixed income market yields, as well as narrower business margins and ongoing equity market volatility, driven by the pandemic environment, are set to place the largest bids. These Mexico sovereign debt offerings should help these investors leverage their U.S.-dollar long positions and enhance their asset-liability management profiles and investment income.
To access the full copy of this commentary, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=305119.
AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.
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