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Federal government refinances debt and goes from 2020 to 2048

The Ministry of Finance and Public Credit (SHCP) reported that on Monday the federal government carried out a debt refinancing operation in the international markets
Mexico City. The Ministry of Finance and Public Credit (SHCP) reported that on Monday the federal government carried out a debt refinancing operation in international markets through which it issued 1,888 million dollars through a new 30-year reference to with these resources to pay in advance the dollar bond maturing in January 2020.

He explained that this operation is part of the strategy to reduce the Historical Balance of Public Sector Financial Requirements (SHRFSP), as a percentage of GDP, from 50.1 in 2016 to 48.0 in 2017.

In this way, the public debt policy accompanies the process of fiscal consolidation through an efficient management of the federal government’s portfolio of liabilities.

This transaction covers in advance 51 percent of the federal government’s external debt repayments scheduled for 2020, without incurring additional net indebtedness.

The repurchase of the bond due in January 2020 and the issuance of the new reference maturing in February 2048 allows the maturity profile of the federal government’s external debt to be replaced by substituting a bond with a remaining term of less than 3 years for a new one with a 30-year term.

The new 30-year reference bond due in February 2048 will yield 4.619 percent and pay a coupon of 4.60 percent. This reduces the financial cost of the foreign debt of the federal government since the bond matures in 2020 that paid a coupon rate equivalent to 5.125 percent.

The issue of the new 30-year bond had a total demand of approximately USD 8,100, equivalent to 4.3 times the amount issued. This is the highest recorded demand for a federal government external debt bond in any currency and any term. In detail, more than 300 orders were received from investors from the Americas, Europe, Asia and the Middle East.

This transaction, together with the liabilities management operations carried out in the international and local markets since 2016, allows to improve the debt maturity profile of the federal government without incurring additional indebtedness and offers the Ministry of Finance and Public Credit flexibility to continue monitoring the conditions in the different markets to be able to take advantage of windows of opportunity that allow to continue improving the profile of public debt.

Through a statement, the Mexican government reiterates its commitment to use public debt in a responsible manner and in accordance with the public policy objectives needed to have sound public finances, an indispensable element for economic growth.

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