Mexico Issues Bonds in Japan; Develops Fourth Sustainable MarketBy Sofía Hanna | Tue, 08/30/2022 - 15:42
The Ministry of Finance and Public Credit (SHCP) announced the inaugural issuance of a bond in Japanese yen. With this issuance, SHCP marks the beginning of the development of the fourth sustainable market, following issuances in euros, pesos, and dollars.
SHCP issued five new benchmark bonds in yen with maturities of 3, 5, 10, 15, and 20 years. The operation was taken to refinance maturities in yen for US$550 million under a neutral transaction that did not increase debt.
Mexico raised 75.6 billion yen (US$551.2 million) with the placement of the Samurai bonds, according to SHCP. “Samurai” bonds are those issued by a non-Japanese entity in the Japanese market in the yen, as previously explained by MBN. The securities are linked to the UN Sustainable Development Goals under the SDG sovereign bond framework. Through these bonds, Mexico became the first Latin American country to place sustainable bonds in Japan. This sustainable debt placement has become the largest ever made by any country in the world in the Japanese debt market. With this placement, a thematic bond yield curve with five nodes is built, allowing Mexican corporations to access financing from sustainable funds. This is the fastest sustainable market development Mexico has ever carried out, reports SHCP.
In accordance with the Sovereign Bond Framework, under which this operation was carried out, and following the sustainable bond guidelines published by the International Capital Market Association (ICMA), an amount equivalent to the total amount issued will be allocated to sustainable projects. Through this move, the Mexican government reaffirms its commitment to developing the bond market with Environmental, Social, and Corporate Governance (ESG) criteria and promoting sustainable financing, said SHCP. This transaction allows the Mexican government to continue building a financing system for projects that seek to combat climate change and close social gaps in the country. The instruments were purchased by large banking institutions, insurance companies, asset management firms, specialized banks, central public accounts, regional cooperatives, regional banks and other entities, including foreign investors, which took 11 percent of the total.
The relationship between Mexico and Japan has been strategic for both countries. In 2019, Japan held the presidency of the G20 and worked hand in hand with Mexico to take advantage of this space to build agreements and find collective solutions. In this context, Mexico agreed on the need to maintain inclusive and sustainable economic growth as one of the priorities of the G20 agenda under the Japanese presidency. Mexico advocated for the promotion of innovation, connectivity, infrastructure and education as priorities of the G20's work, according to the Ministry of Foreign Affairs.