In case you missed it, despite all the negative headlines late last year, Mexico was remarkably disciplined in 2009.
The government front-loaded stimulus yet also contained its deficit with cost cutting during its recession, apparently always focused on defending its credit rating as best it could.
The result is that Mexican bonds are picking up substantial attention since Mexico’s finances are actually quite strong relative to many other nations.
As a sign of this, Mexico just pulled off its first domestic bond sale and attracted bids worth three times the total $2 billion of peso-denominated debt offered. Yields on the 10-year bonds came in at 7.66%. PIMCO’s even a fan:
Mexico is winning over investors after President Felipe Calderon carried out spending cuts and tax increases totaling more than $10 billion to contain the deficit even as the economy shrank 6.5 per cent last year in the worst recession since 1932. Standard & Poor’s has shifted the outlook for Mexico to stable from negative after lowering its rating one step to BBB, the second-lowest investment-grade level, in December, a month after Fitch Ratings made the same move.
Pacific Investment Management Co., manager of the world’s biggest bond fund, has been adding Mexican debt because it’s “attractively priced,” fund manager Michael Gomez said in a Feb. 9 interview.
Mexico will “likely” hold its debt-to-GDP ratio at 37 per cent this year as the economy grows 3.9 per cent, Werner said. The ratio will resume a “declining trend” in 2011, he said. The IMF estimates debt in the advanced G-20 economies will reach 118 per cent of GDP in 2014, up from about 80 per cent before the crisis.