* Pricing of 100-year Mexico bond expected Tuesday
* Strong demand could see near $1 billion issue
* Sources see yield at 6.0 to 6.125 pct at sale
(Recasts, adds byline, detail on demand)
By Lizbeth Salazar
MEXICO CITY, Oct 5 Mexico launched its first
100-year bond on Tuesday, sources familiar with the deal said,
in a bold bid to secure cheaper funds from global investors.
The first tranche of a new debt sale of up to $80 billion
attracted enough demand for issuance of $1 billion, double the
$500 million expected earlier in the day, a source close to the
The bond, which is expected to yield between 6.0 and 6.125
percent, will likely become a valuable benchmark for Mexico
when it sells other bonds of shorter maturity.
Mexico's benchmark 10-year note yield fell to a record low
this year as investors turned to developing countries for
returns greater than offered by U.S. Treasury debt.
The government of Latin America's No. 2 economy is not in
dire need of funds but the issue will set a valuable long-term
marker for future debt issuance, said Enrique Alvarez, an
analyst with IDEAglobal in New York.
Mexico's credit rating was downgraded last year but it is
still investment grade and has a stable outlook.
The debt sale, via Deutsche Bank and Goldman Sachs,
represents a sensible government step to shore up overall
public finances while debt markets are inviting, said Gabriel
Casillas, chief economist at JPMorgan in Mexico.
"If the government can bring a bond with this maturity, it
means you have healthy finances, (but) I don't think it
represents any structural change in the way bonds are issued,"
The yield on Mexico's 10-year bond MX10YT=RR was down 2
basis points at 6.14 percent on Tuesday afternoon. Yields on
30-year bonds were down 6 basis points at 7.11 percent. The
benchmark's yield hit the historically low rate of 5.96 percent
Strong investor demand has meant a low borrowing rate for
Mexico, but other countries in the region have even waved
investors away to try to keep their currencies from rising
Earlier this week, Brazil doubled to 4.0 percent a tax on
foreign investors buying local, fixed-income assets to curb a
rise in the real which was hurting exports.
If Mexico's pioneering move is a success, analysts expect
other nations will mull their own century bonds.
"There is nothing stopping Brazil from doing one," said
Nick Chamie of RBC Capital Markets. "It's literally having an
investment bank coming to them saying 'We have clients lined up
to do it, are you interested?' And they'll say 'yes'."
The big debt issuance follows with other fund raising by
Latin American countries. Last month Brazil's state controlled
oil company Petrobras (PETR4.SA)(PBR.N) raised a record $70
billion in an IPO.
The last time the region saw a 100-year bond was in a
corporate issue in 1997, when Chile's Embotelladora Andina sold
a $100-million century bond, according to IFR Markets.
Mexico's 100-year issue could reach up to $80 billion,
according to a securities filing with the U.S. Securities and
(Reporting by Paul Kilby, Lizbeth Salazar, Samantha Pearson,
Tomas Sarmiento, Luis Rojas Mena, Caroline Stauffer, Michael
O'Boyle and Jean Luis Arce, Writing by Patrick Rucker; editing
by Missy Ryan)