Mexican structured bond issuance in 2005 hits $2 billion

Standard and Poor’s said that $2.03 billion worth of Mexican structured bonds have been issued so far this year. And with US dollar-denominated paper becoming more popular, use of derivatives in transactions is increasing.

Total Mexican issuance in the first quarter of 2005 is 114% higher than for the same period in 2004. "For Mexican issuers, the use of the derivative market has expanded their financing alternatives to the cross-border market,” said Guillermo Valle, a credit analyst at rating agency, Standard and Poor's, in Mexico City.

The currency and interest rate risk of cross-border transactions are typically hedged using swaps. “Combining domestic and cross-border transactions, investors purchased approximately US$9.9 billion in Mexican structured bonds,” he added.

Standard and Poor's assigned ratings to 28 new transactions in 2004. The rating agency said it expects Mexican mortgage originators’ execution of cross-border transactions via the use of derivatives to be one of the drivers of asset-backed securities (ABS) issuance for the remainder of the year.