Mexico Studies Samurai Bond Sale in the Second Half of the Year

(Bloomberg) -- Mexico is weighing a return to yen debt markets in the second half of the year, according to Deputy Finance Minister Gabriel Yorio.

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“We tap this market every one and a half or two years, on average — so this might be a good time for going back,” Yorio said Monday, in an interview in New York.

Mexico is among the few emerging markets outside Asia that sell yen-denominated debt, offering slightly higher returns to Japanese investors accustomed to ultra-low yields. Mexico last sold so-called Samurai bonds in 2022, when it raised more than half a billion dollars via notes tied to United Nations Sustainable Development Goals.

Another option would be issuing in the local market, Yorio said.

The finance ministry is also gauging appetite among local pension funds for development capital certificates, to help complete the government’s $6 billion deal to buy power plants from Spain’s Iberdrola. The instruments, known as CKDs, allow investors to participate in private equity-type projects.

“We’re in a kind of roadshow phase,” Yorio said. “We’re receiving feedback in order to decide if we tap or not the market.”

The government could potentially tap this market in second half of the year as well, he said.

‘Super’ Peso

The Mexican peso has been the strongest performing major currency over the last 12 months, which Yorio attributed to strong foreign direct investment, robust remittances and high interest rates.

Still, the currency could face some volatility around the US elections, he added. Donald Trump’s calls for higher tariffs on Mexico have sometimes caused the peso to weaken. The currency experienced a flash crash last month amid heightened tensions in the Middle East.

Recent economic growth has been in line with government expectations, despite fears of a global slowdown, he said. While the finance ministry estimates gross domestic product expansion of 2.5% to 3.5% this year, it uses the lower end of this range for its budget assumptions, he said.

A new state-controlled pension fund, to be set up before President Andres Manuel Lopez Obrador leaves office in October, will be administrated by the central bank, Yorio said. The finance ministry is currently drafting the rules under which it will operate.

Yorio said he would be happy to serve in an eventual administration of Claudia Sheinbaum, the presidential frontrunner who is backed by Lopez Obrador in next month’s election.

“But that’s someone else’s decision,” he said.

--With assistance from Michael O'Boyle, Maya Averbuch and Carolina Millan.

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