June 28, 2019 / 9:51 PM / 24 days ago

UPDATE 1-Mexico looking at issuing its first Panda bond -finance ministry

(Adds comments on Green bonds, Pemex, context)

By Dave Graham

MEXICO CITY, June 28 (Reuters) - Mexico is analyzing whether to issue its first Panda bond, or debt denominated in Chinese yuan, though such a step to broaden the country’s investor base would not take place before next year, a senior finance ministry official said on Friday.

Speaking a day after Mexico’s government gave details of its latest Samurai bond - debt denominated in Japanese yen - Gabriel Yorio, head of the finance ministry’s public debt office, said Mexico was mulling more foreign currency issuance.

“There are ideas like the Panda, ideas like whether we should return to Swiss francs,” he told Reuters in an interview.

In recent months, an increasing number of countries have issued Panda bonds that target mainland Chinese investors. Yorio said yuan-denominated debt “could be the next big market.”

“I would think that if we did something like that, it could maybe be next year,” he added, noting that Mexico’s government still needed time to consider a number of factors.

Mexican Foreign Minister Marcelo Ebrard is due to visit China next week.

If Mexico did pursue the Panda option, it would not be planning to make the bond placement a one-off, Yorio noted.

He said Mexico is also giving “serious” consideration to issuing Green bonds, aimed at funding environmentally-friendly projects. That would likely take place next year at the earliest, the official said.

The Green bonds could be tranches in a bigger placement, Yorio said, giving the example of the Samurai bond this week, which was issued in offerings of varying maturities.

“(It could be) half Green, the other half conventional,” he said, saying a sum of around $500 million might be a volume Mexico would consider for Green issuance.

The administration of leftist President Andres Manuel Lopez Obrador has vowed to keep a tight rein on the federal budget, but earlier this month Mexico suffered a downgrade to its sovereign credit rating from ratings agency Fitch.

Mexican state oil company Petroleos Mexicanos (Pemex) is saddled with financial debt of some $106 billion, and rating agencies and other institutions have repeatedly flagged their concerns about the sustainability of the firm’s finances.

Yorio acknowledged that Pemex’s situation was weighing on investor sentiment, but said that he had noted more concern about U.S. President Donald Trump’s threat to impose tariffs on Mexican exports to the United States. (Reporting by Dave Graham; editing by Frank Jack Daniel and Rosalba O’Brien)

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