Supply shortage hits bond investors

Stringent rules preventing Mexican pension funds from investing in non-investment grade corporate bonds and a limited pool of issuers capable of achieving high-grade ratings have led to a damaging supply/demand imbalance in Mexico's bond markets. Alan McNee reports

Mexico has come a long way since the 'Tequila Crisis' of 1994-95, when a sudden devaluation in the peso spelled disaster for the recently privatised banking sector. The recapitalisation of the sector has been achieved by allowing foreign players to buy up or take stakes in Mexican banks. This economic liberalisation has led to a period of impressive financial stability and capital markets growth.

Initial fears that the new government of President Felipe Calderon would face a constitutional crisis