Mexico mulls Chinese yuan-denominated bond

1 Jul 19

Mexico is considering issuing its first ‘Panda bond’ – debt denominated in Chinese yuan – in an effort to broaden the country’s investor base.

The move, which builds on other recent efforts to explore foreign currency debt, is not likely to happen before next year, a senior finance ministry official told Reuters

The country is also giving “serious” consideration to issuing green bonds aimed at funding projects to support environmental policies, the official added. 

“There are ideas like the Panda, ideas like whether we should return to Swiss francs,” Gabriel Yorio, head of the finance ministry’s public debt office, told Reuters in an interview. 

“I would think that if we did something like that, it could maybe be next year.” 

A growing number of countries are issuing bonds that target Chinese investors, and Yorio told the news agency that yuan-denominated debt “could be the next big market”. 

He was speaking a day after Mexico’s government gave details of its latest ‘Samurai bond’ – debt denominated in Japanese yen – on the eve of a visit to China by Mexican foreign minister Marcelo Ebrard.

Yorio said Mexico’s government still needed time to consider other factors before going ahead with a Panda bond, but if it does so it is not likely to be a one-off.

The Mexican official also disclosed that they are considering issuing green bonds –  amounting to a modest $500m – possibly through tranches as part of a bigger placement like the Samurai bond that Mexico issued this week. 

“[It could be] half green, the other half conventional,” Yorio said.

Mexico’s enthusiasm for foreign currency issuance is in part a response to investor unease about debts at the state oil company Pemex.

Pemex is burdened with debts of $106bn, prompting rating agencies to raise concerns about the sustainability of its finances. 

In June, ratings agency Fitch downgraded Mexico’s sovereign credit rating to BBB – nearing junk status – mainly because of Pemex’s debts, and Moody’s lowered its outlook to negative.

Yorio conceded that Pemex’s debts are influencing investor sentiment – but added that greater concerns relate to threats by US President Donald Trump to impose tariffs on Mexican imports.

In May Portugal raised Rmb2bn in a Panda bond, the first sovereign debt sale on China’s bond market by a eurozone country, with orders coming in at three times the amount on offer.

  • Gavin O'Toole, expert on Latin America
    Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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