J.P. Morgan Securities and Merrill Lynch & Co. recently led a well- received $1 billion global bond issue for Mexico.
Demand was high enough to increase the bond issue to $1 billion from an initial $750 million.
Analysts attributed the success of the deal to the appetite for high yield debt, as well as the prevailing view that the Mexican economy has stabilized.
"The crisis management aspect of things which characterized last year is now over, and the issues are now political, surrounding when the recovery will begin," said Tulio Vera, an analyst of Latin American sovereign credits at Bear Stearns & Co.
"There's a sense in the market that a degree of stability is returning to Mexico," said Mr. Vera.
The five-year bonds for the BB-rated country were priced at par to yield 9.75%, or 445 basis points over the five-year U.S. Treasury note.
Mexico's spread of 445 basis points was relatively attractive, compared with current yields of about 345 basis points over comparable Treasuries for U.S. companies with similar debt ratings.
After the deal was sold off, the bonds tightened approximately 10 basis points, Mr. Vera said, underscoring investors' interest in bonds with greater return.
The success of this first-ever global denominated bond issue by Mexico may be a harbinger of more bond issues from other emerging markets, and will serve as a bench mark for pricing other Latin American deals.
"This deal was a tremendous success for Mexico and will benefit Latin American countries in general," said James Quigley, a managing director in the global debt transaction group at Merrill. "We will see other sovereign global dollar deals following shortly on their heels."
Mr. Vera of Bear Stearns said he anticipates a good deal of issuance out of Mexico, Brazil, and Argentina this year. With $4.7 billion in sovereign debt due this year, Argentina has a clear need to refinance, Mr. Vera said.
Mexico chose J.P. Morgan and Merrill Lynch to lead the deal because of their relative strengths in emerging markets and underwriting.
"J.P. Morgan is tremendously active in the emerging markets, and Merrill Lynch has a large distribution base," said Rodrigo Ocejo, Mexico's director of external credit. "The two of them made a good team."
John Massad, a vice president in the syndicate group at J.P. Morgan Securities, said the deal was the "inaugural reentry into the international capital markets."
U.S. investors bought approximately 60% of the bonds, with European and Asian investors buying 25% and 15%, respectively.
Within the United States, insurance companies, pension funds, and investment advisers bought the bonds.
While Mexico has no immediate plans to issue other debt, Mr. Ocejo said it was only a matter of time before it returns to the U.S. capital markets.
"There's no question about it," Mr. Ocejo said. "Most of our revenues are in dollars, and for us, it's the natural market."
The market has an appetite for more, Mr. Massad said, and "would be ready when they decide to come back."
