Moody’s assigns Baa3 rating to Mexico’s Samurai bonds, maintaining investment grade

Moody’s Ratings gave Mexico’s latest Samurai bond issue a Baa3 rating, keeping the country within investment grade while assigning a stable outlook.

The yen-denominated senior unsecured bonds total 282.8 billion yen, equivalent to about $1.774 billion. The issue comprises four series with maturities ranging from three years and six months to 20 years. Moody’s classifies Baa3 as the lowest investment-grade rating, indicating moderate credit risk and an acceptable capacity to service debt.

The rating reflects Mexico’s long-term issuer rating of Baa3, as well as the size, diversification and resilience of its economy when facing shocks. Moody’s said those strengths offset weak institutional quality, which affects government effectiveness.

The stable outlook reflects the agency’s expectation that any further weakening of Mexico’s fiscal strength will be gradual and partly offset by macroeconomic stability, policy responsiveness and underlying economic strength. Continued support for state oil company Pemex will limit fiscal consolidation, Moody’s said, although it does not see macroeconomic imbalances that would amplify fiscal risks.

The bonds will constitute Mexico’s direct, general, unconditional and unsubordinated external public debt, backed by the country’s full faith and credit. Proceeds are intended for general government purposes and budget programs that qualify as eligible spending under Mexico’s Sustainable Development Goals Sovereign Bond Framework.