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Henderson buys 100-year Mexican sterling bond

Henderson buys 100-year Mexican sterling bond

Henderson Global Investors has added a 100-year Mexican bond denominated in sterling to four of its largest funds, the UK-based group has announced.

Mexico raised £1 billion (€1.19 billion) from Thursday’s auction of the bonds, which mature in 2114.

In an investor note, James McAlevey, head of interest rates, explained the rationale behind adding the extremely long-dated bond.

‘Typically, these bonds are issued by high-quality companies and governments given the long time horizon, and have been supported by demand from investors looking for higher-yielding investments and those with long-dated liabilities.

‘Despite the recent uncertainties and asset price performance in some emerging markets, Mexico stands out as one of the few countries where fundamental reforms are helping to improve the country’s standing, with rating agency Moody's upgrading Mexico’s debt to "A3" in February.’

It marks the second 100-year bond issued by Mexico, having undertaken a 100-year US dollar bond issue in 2010. This latest issuance, the sterling bond, has a yield of 5.75% and duration of 18 years.

McAlevey said the firm had added the bond to its Total Return Bond, Unconstrained Bond, Emerging Market Alpha and Credit Alpha funds.

He said, while the outlook for Mexico is more positive than many of its emerging market peers, McAlevey is still cognisant of the risks associated with the developing world.

‘While we have a positive view on Mexico versus its emerging market peers, the extremely long-dated nature of these bonds means that investors also need to be wary of the future path of interest rates, and given the long-term nature of the investor base, the limited liquidity in secondary markets.’

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