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(Bloomberg) — Mexico and Hungary are tapping into global bond markets for the second time this year, as emerging countries continue to attract investor appetite, even amid a sell-off in risky assets.
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Mexico raised 2 billion euros ($2. 2 billion) in sustainable sovereign bonds with maturities of more than 8 years and a coupon of 4. 49%, according to a government statement. The bonds were valued at a spread of about 180 fundamental mid-swap issues on Thursday, narrowing from initial value negotiations to 210 foundational issues, according to other people familiar with the matter, who asked not to be known because it’s not legal to talk about it.
The offer comes just weeks after the Latin American country sold $7. 5 billion in global dollar bills in its biggest deal to date. Mexico has a remarkable $10 billion in global markets similar to the Sustainable Development Goals, the official said.
Hungary, meanwhile, sold €1.5 billion in green Eurobonds at a spread of about 160 basis points over midswaps, according to a person familiar with the matter. That’s on top of $2.5 billion in debt raised from international investors earlier this month. The sales put the country on track to exceed its foreign-currency debt plan for the first half of 2024, according to a presentation published Thursday. It is also planning Samurai and Panda bond issuances in the second half of the year.
Debt sales are piling up in emerging markets: Chile, Saudi Arabia, Slovenia and a handful of corporations have tapped into the markets for 2024, and Côte d’Ivoire is also planning the first Eurobond sale in sub-Saharan Africa in about two years. years next week. Governments and companies in emerging countries have issued about $59 billion worth of hard currency notes as of this month, according to data compiled by Bloomberg.
“After a sluggish 2023, this year is shaping up to be much more active,” said Mauro Favini, senior portfolio manager at The Vanguard Group. “Fiscal desires have risen and yields have fallen. The combination of those points creates a very supply-friendly environment.
The avalanche comes even as emerging-market assets fall as policymakers in the U. S. and Europe reject bets on lower interest rates, forcing investors to adjust their positions. As the threatening asset environment has deteriorated, countries such as Mexico and Hungary are taking advantage of the possibility of deteriorating threat factor situations amid elections and geopolitical conflicts.
Read More: Traders Heed Central Bank Pushback Against Bold Rate-Cut Bets
Hungarian Finance Minister Mihaly Varga said earlier this month that his country had to turn to previous markets in case the favorable yield environment changed. The country was likely looking to take a breather in its dispute with the European Union, Viktor Szabo, said on Thursday, Abrdn’s head of emerging market debt.
The European Commission last month decided to release to Hungary €10.2 billion, a third of the funds that were blocked a year earlier for democratic backsliding and graft under Prime Minister Viktor Orban’s rule. Commission President Ursula von der Leyen said the €20 billion still frozen will “remain blocked until Hungary fulfills all the necessary conditions,” including on LGBTQ and asylum rights.
“The publication of the European budget and green emissions will most likely boost demand; it’s the right time,” Szabo said, adding that a rise in U. S. Treasury yields has also forced issuers to act.
Read more: European Assembly steps forward to withhold Orban funds
In Mexico, sales are rising as President Andres Manuel Lopez Obrador ramps up spending in his final year in office.
The country will post its largest budget deficit since 1988 as AMLO steps up his monetary aid systems and seeks to complete historic projects ahead of June elections. This is a major update to its past fiscal austerity, which has acted as a currency stabilizer in recent years.
“This year, the funding desires for Mexico are relatively higher,” said Marco Oviedo, senior strategist at XP. “They probably need to exploit external channels as much as imaginable to avoid putting too much pressure on domestic markets. “
–With assistance from Vinícius Andrade.
(Updates with coupon amount, official in current paragraph)
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