Why bond investors are willing to bet on Mexico’s state-owned oil company Petroleos despite sky-high debts, a slump in demand and no clear direction about how the government will turn the money-losing driller around by stefaniedioses rodrigocampos
MEXICO CITY/NEW YORK - Mexico’s state-owned oil company Petroleos Mexicanos has seen investor sentiment improve in recent weeks despite sky-high debts, a slump in demand and no clear direction about how the government will turn the money-losing driller around.
“If we came to believe that sovereign support was less forthcoming, or that there was an effort to more fully separate the sovereign and the oil sector as independent entities, we would become more cautious,” said James Barrineau, co-head of emerging market debt for the Americas at Schroders. So far in May, spreads for the most highly traded Pemex bonds have narrowed by triple digits, MarketAxess data show, with the 2030 71654QCT7=tightening by 240 basis points and the January 2027 MX203189451=by almost 200.
With the Mexican sovereign spread to the U.S. 10-year among the widest in its credit rating category, expected tightening should further pressure Pemex yields lower, analysts and investors said. Yet analysts and investors now say the company’s dire straits harden the case for government support.
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