Evidence of how extraordinary the demand for yield has become, Mexico today plans on selling $500mm of 100 year debt with a coupon of about 6%. It’s an amazing leap of faith on the part of investors for a country that saw y/o/y CPI inflation in 1988 of 179% and 52% as early as 1996. We also can’t forget the 1994 Mexican Peso currency crisis that led to a multinational bailout for Mexico that consisted of loans and guarantees totaling $50b. Investors also have to hope that at least over the next few years, the drug wars don’t suffocate their economy. Bottom line, artificially cheap rates can finance anything at historically unforeseen levels when the demand for yield is strong. Sound familiar?
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