SHCP Generates 10-Year Benchmark to Refinance Debt

The Ministry of Finance and Public Credit (SHCP) introduced a new 10-year benchmark, as part of its strategy to strengthen Mexico’s finances. This “unprecedented” operation follows an overwhelming demand by local and foreign investors. 

“The Treasury refinances debt and creates a new 10-year benchmark in the local market. As part of the debt management strategy of the Government of Mexico, today a debt refinancing was carried out with a new bond reference M to 10 years. With this operation it was possible to increase the average term of the debt, liquidity in the local market and the sources of financing at a fixed rate in our country,” explained the SHCP via a press release. 

The Mexican government exchanged debt for MX$39 billion pesos (US$1.9 billion) at a 10 year term. The SHCP previously held a syndicated auction on Dec. 6 for MX$12.5 billion (US$629 million), as the entity attributed the success of the operation to the previous auctions, which permitted the creation of the new M bond. The bond will have an initial amount of MX$51.5 billion (US$2.59 billion), an “unprecedented achievement” in the local debt market, according to SHCP. 

The M Bond has a coupon rate of 7.5 percent and is backed with a strong demand of MX$70 billion (US$3.5 billion). The SHCP highlighted the international and national demand by investors, which creates a palpable feeling of confidence in the administration of Mexico’s debt and macroeconomic fundamentals. 

The strategy sought to obtain liquidity and enhance the price discovery process in the government securities market denominated in pesos. “This placement was made through the participants of the local debt market and counted with the participation of national and foreign investors. With this result, the Federal Government has managed to update its references for three, five, 10 and 30 years of BONOS M during the last months. The Government of Mexico reiterates its commitment to use the public indebtedness in a responsible manner consistent with the public policy objective of having healthy and sustainable public finances,” concluded SHCP.