Mexico’s Quasi-Sovereign credits have been a good place to gain alpha. Not only do the bonds have a higher carry, but they have also experienced an interesting spread compression. Over the past six months, PEMEX bonds have seen the largest spread compression and trade at the tightest level in a year. The same can be said about MEXCAT and CFE, although at a different level, while liquidity is an issue for these two credits. We still like PEMEX bonds in the 7-9Y maturity with a +400bp spread over the sovereigns.
PETBRA spreads remain stable, although tilted towards the lower band of the range. Given the recent noise about a potential change of CEO and dividend payments, one would have expected a larger move. With the current uncertainties and the low spread levels, we have a cautious view on PETBRA, especially relative to Brazil.
As of late, Colombian bonds have performed well, particularly after the recent new issuance, while ECOPET bonds have lagged and spreads have widened. We prefer those bonds at the belly of the curve with +90bp spreads (ECOPET 31s, 33s and 36s).
CDEL remains under pressure, once copper production recovers and given the strength of the prices. We see it as a potential opportunity worth keeping a close eye on
See summary and statistics attached:
- PEMEX: We like front-dated bonds up to nine-year tenor with +400bp spreads over the sovereign
- PETBRA: 2033 spreads are at close to their tightest levels; we consider this rich
- CDEL: We see this as an opportunity; given liquidity and spread levels, we prefer CDEL 36Ns
- ECOPET: We like low-priced 2031s, 2033s, and 2036s, which carry +90bp over sovereign bonds.