UMS Brings $1.25 in Exchange Warrants

Mexico plans to sell warrants with a notional value of $1.25bn that will allow investors to exchange foreign currency debt for peso debt. On April 2 and 3, investors will be able to purchase two types of warrant that allows them to trade in 21 series of dollar, euro, deutschemark and Italian lira-denominated bonds with maturities between 2009 and 2034 for local bonds. The first warrant has a notional value of about $1bn and offers peso-denominated bonds due 2014, 2017 and 2036. The second is worth roughly $250m and offers 2017 and 2035 debt denominated in UDIs. Holders of the warrants will be able to receive their new bonds on October 9. This is the first Mexican warrant transaction to allow swapping into UDIs, as well as the first time the liquid global 2034s will be involved, according to a banker on the deal. This is the fourth sale of warrants since 2005. The government has exchanged more than $4bn in foreign-currency debt for peso bonds in the last two years. Barclays and Merrill Lynch are managing the transaction.

LatAm, Brazil Equities Among Favorites: ML

LatAm is the preferred emerging market of choice for global equity investors in the next 12 months, according the most recent Merrill Lynch investor survey. And Brazil, along with Russia, is the top rated BRIC country, says the report, which polled 193 managers representing $676bn in AUM between March 7 and March 13. While managers were very underweight in LatAm in January, their average position changed over February and in March the region enjoys the only overweight position. Meanwhile they are neutral in EMEA and underweight in Asia. Within the BRICs, Brazil’s overweight rating has increased since January, while Russia’s has decreased from a dominant position. India and China have seen underweight positions all year so far. Brazil and Russia also enjoy the highest country allocations within all EM, followed by Thailand, Indonesia and Malaysia.

Merrill Launches Local Debt Indices

Merrill Lynch is launching new local EM sovereign debt indices to track the performance of EM sovereigns debt denominated in the issuer’s local currency. “The fact that we are launching this is a reflection of the growing importance of the local debt markets to institutional investors outside of the issuer’s domestic markets,” Phil Galdi, head of Merrill’s global bond index group in New York, tells LatinFinance. “These markets have grown in size and now represent an important asset class that has offered strong historical returns with low correlation to other asset classes,” he adds. The series includes three new indices: The Merrill local debt markets plus index is a broad composite index designed to track local currency sovereign debt at A1 or lower on average; the Merrill net cap-weighted liquid local debt markets index represents a liquid basket of fixed rate bonds with country allocations based on relative capitalization weights in corresponding broad country indices. The Merrill net equal-weighted liquid local debt markets index meanwhile represents a liquid basket of fixed rate bonds with equally weighted country exposure. They are aimed at institutional investors.