Dollar bonds of Pemex were higher by as much as 3% across the curve as Mexican President AMLO said that the government could potentially take over some of Pemex’s obligations or cut the company’s taxes. He said, “It has been done since the first year, and we are going to continue doing it, and other actions, helping with the transfer of Pemex debts to sovereign debt, to treasury debt”. Analysts note that the statement by the president is seen as a clear sign of support by the government especially after sources said that Pemex was expected to pay its debts due in 1Q 2023 without government help, earlier this month. Since late 2018, the government has spent over $20 billion in capital injections and tax cuts for Pemex.
Pemex’s dollar bonds were higher across the curve, led by its longer-dated bonds on this news. To exclude the impact of the move in Treasuries, we looked at the change in Pemex’s Z-spreads. Broadly, its Z-spreads have also tightened across the curve:
Pemex’s 6.5% 2041s are up 2.4% since Friday to trade at 72.55, yielding 9.99%. Its Z-spread tightened 7.2bp to 675.2bp. Its 6.625% 2035s were up 2.1% to 79.25, yielding 9.77%. Its Z-spread tightened 6.3bp to 620.75bp. Also, its 6.49% 2027s were up 1.1% to 95.03, yielding 8.27%. Its Z-spread tightened 6.4bp to 443.55bp.
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