The market in Mexican corporate bonds – ‘Cebures’ – had historically been limited in size with little foreign investor interest. The high local borrowing costs deterred local corporates from raising money in the peso market.
This meant large entities, such as Pemex, raised the bulk of their term debt in the form of international dollar issues. For international investors, there was little incentive to invest in Cebures as they did not figure in international corporate bond indices.
Keen to break this circle and stimulate the local corporate bond market, Mexico’s Ministry of Finance approached Euroclear in 2014 to discuss what was needed to make Cebures ‘Euroclearable’. Euroclear had supported Mexican government bonds and equities since 1995.
The solution was to change and simplify the way Cebures were treated for tax and align Mexico’s corporate issuance and asset servicing processes with international standards. In December 2014, the Ministry of Finance and Euroclear jointly announced that Euroclear would begin servicing Cebures from the start of 2015.
The move gives international investors easy access to Cebures through their Euroclear account and makes it possible for the Mexican peso to qualify for inclusion in international indices.
Within six weeks of the new service opening, Pemex announced it was to raise MXN 17 billion (USD 850 million) in a Cebures issue, of which MXN 9 billion would be allocated to international investors.
The Pemex Treasurer, Rodolfo Campos, said: "Having Mexican peso-Denominated securities settle through Euroclear will provide international investors access to the world’s leading post-trade services provider, and we believe it will help lay the foundations for the future growth of Mexico’s corporate debt market".
While Mexican issuers can now tap into international demand, international investors can more easily take advantage of the yield pick-up offered in the Mexican market.
