Betting on Mexico for the Next 100 Years

Would you invest in a 6% bond maturing in 100 years in a country in the midst of a mini-civil war and whose residents are so desperately poor that they will risk their lives emigrating to a richer neighboring country?

A lot of people answered yes to that question.

Via Reuters:

Mexico brought its first century bond to market on Tuesday, said sources familiar with the deal, in a bold government move to secure relatively cheap financing from global investors eager to lend.

The first tranche of $500 million in debt was being auctioned on Tuesday and expected to yield between 6 and 6.125 percent, according to sources familiar with the deal. Mexico could later add to that bond with further auctions.

Mexico’s benchmark 10-year note hit record lows this year as yield-hungry investors have turned to developing countries for returns that outpace U.S. Treasury bonds and some of the world’s other ultra-safe debt.

Investors flocked to mortgage backed CDOs during the bubble ostensibly because they were seeking yield and those instruments promised it along with a AAA rating. I guess that investors having discovered that ratings represent no promise of actual safety have dispensed with risk assessment and will now settle for yield alone.

Can we at least agree up front that when this one goes bad nobody gets bailed out?

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