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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About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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