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News Article

New MX$12.5 billion MBONO Placed at Fixed Rate for 5 Years

By Emilio Aristegui | Mon, 09/27/2021 - 10:08

Mexico’s Ministry of Finance and Public Credit (SHCP) reported the placement of a new 5-year reference with a fixed interest rate bond (MBONO) in a press release. The bond has the emission key M 270304 and expires on March 2027.

“The Federal Government placed a MX$12.5 billion (US$621 million) in a new 5-year fixed rate bond in order to maintain a liquid reference for the next auctions and improve the profile of scheduled amortizations between 4 and 6 years.”

As reported by MB, the federal government is not seeking to add more debt. The economic package for 2022 highlights the importance of maintaining a solid financial stability for the country and SHCP tracks on the same goal with this recent placement. “This operation does not represent additional indebtedness to that authorized by the Congress of the Union and remains in line with what was announced in the government securities placement program for 3Q21.” The alignment of financial stability goals for the different government institutions is of extreme relevance as the country as a whole clearly seeks a significant recovery.

This new financial instrument “will serve as a reference for corporate issuers and development banks,” reads SHCP’s press release. Beyond setting goals for the financial industry and investors, the bond aims to increase “the participation of a wide range of investors and improving the liquidity conditions of the secondary market.”

As the Federal Government develops different financial strategies to help the economic recovery, this bond represents a major bet for Mexico. “It was placed under favorable conditions for the Federal Government despite the high volatility that persists in international financial markets and the uncertainty associated with the behavior of the world, paying a coupon rate of 5.5 percent and a yield rate of 6.93 percent.”

Nevertheless, the country showed important signs of trust from national and international investors, reaching a total demand of nearly MX$15.19 billion (US$755 million), equivalent to 1.22 times the original amount. The interest in the bond is of extreme importance for a government that seeks trust and investments after the economic downfall of 2020. The fundamentals of Mexico’s economy seem to maintain strength according to SCHP. With the demand of this new bond skyrocketing, Mexico hopes to have found a correct strategy to achieve a fast-paced economic recovery.

The data used in this article was sourced from:  
SHCP, SEGOB
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Emilio Aristegui Emilio Aristegui Junior Journalist and Industry Analyst