2022 Begins with External Financing Program

The Ministry of Finance and Public Credit (SHCP) announced the issuance of two new bonds to begin 2022, as the Federal Government seeks to follow the Annual Financing Plan for the year.

“As every year, Mexico inaugurated the issuance of [bonds among] emerging countries in international markets, this time with two bond operations in dollars. At the same time, the external debt refinancing was carried out for US$2.3 billion, which reduced the financial pressure by 70 percent by 2023,” reads an SHCP press release.

One of the bonds was placed for a 12-year period and will pay a 3.5 percent coupon, which represents the third lowest coupon for dollar-denominated bonds. The Mexican Federal government also announced that with this coupon, it has been able to reach six of the 10 lowest coupons amongst all bonds issued in dollars. The Federal Government issued debt at these terms in the market for the last time in April 2020. The second bond, which is scheduled for 30 years, is expected to pay a coupon of 4.4 percent.

Demand for the bond reached a total figure of US$10.4 billion after its issuance, which represents 2.5 times the original amount issued. SHCP said that 240 global investors participated and that the Federal Government was able to advance its external financing program by 57.3 percent for the scheduled plan for 2022.

The operation totaled US$5.8 billion, as SHCP plans to use US$600 million to buy back a bond in advance with a coupon of 4 percent that originally matures in October 2023. Through this operation, the Federal Government aims to reduce the maturities of bonds in foreign currencies as much as possible for 2023.

“US$1.7 billion correspond to bond exchanges along the curve for the new references in order to provide greater liquidity and reduce the average cost of debt. Investors were given the opportunity to exchange their bonds: i) maturing between 2025 and 2032 for the new 12-year bond, or ii) maturing between 2044 and 2051 for the new 30-year bond,” said SHCP.

A total of US$3.5 billion will be used to cover financing needs, with US$1.6 billion being distributed for the 12-year bond and US$1.9 billion for the 30-year bond. SHCP also said that the use of external indebtedness as a complementary source of financing will benefit Mexico’s public finances, as established in the Annual Financing Plan for 2022.