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Mexico Selling 100 Year Sovereign Bonds, US Consols To Follow

Submitted by Tyler Durden on 10/05/2010 13:58 -0400

If anyone needs any confirmation that investors are now fully aware repayments at maturity of sovereign debt issues will likely not occur, ever, is today's announcement that Mexico is in the market with a $500 million century issue (100 year maturity). Lead underwriters on this brilliant piece of paper are Deutsche Bank and Goldman. We are willing to wager that it will also be these two firms' restructuring groups which will handle the ensuing insolvency of the southern neighbor. Which, however, will not occur before the US brings back that other brilliant invention- the consol (which was so brilliant, one wonders if Goldman did not exist back in the 18th century).

From Bloomberg:

Mexico plans to sell $500 million of bonds due in 100 years in the country’s longest-maturity debt issue.

The government will sell the bonds as soon as today, said a person familiar with the transaction. Deutsche Bank AG and Goldman Sachs Group Inc. are arranging the sale, said the person, who declined to be identified because terms aren’t set.

Mexico sold 850 million euros ($1.08 billion) of seven-year bonds July 8 in its first European offering since 2005. It has raised $4.1 billion in international markets this year, according to data compiled by Bloomberg. Mexico’s 6.05 percent bond due in 2040 is currently the country’s longest-maturity security, Bloomberg data show.

The extra yield investors demand to own Mexican debt instead of U.S. Treasuries narrowed one basis point, or 0.01 percentage point, to 1.51 percentage points at 12:08 p.m. in New York, according to JPMorgan Chase & Co.’s EMBI index.

- advertisements -

Tue, 10/05/2010 - 14:03 | 626546 Zexe

The whole.system is based on rolling debt over to infinity. It shud be no surprise to anyone. When this crumbles ( and it will) everything will start from scratch. some fools will be left with worthless debt. Musical chairs!!!

Tue, 10/05/2010 - 15:33 | 626999 Bob

I'm surprised it's not denominated in US dollars--what about safety?

Tue, 10/05/2010 - 14:04 | 626553 FubarNation

Is this an Onion story?

Tue, 10/05/2010 - 14:16 | 626625 HarryWanger

Sadly, as much as it seems to be an Onion story, it's true. Crazy ass stuff here.

Tue, 10/05/2010 - 14:45 | 626783 MarketTruth

OMG!!! US Government Coup Wipes Out National Debt!!!

www.theonion.com/video/us-government-stages-fake-coup-to-wipe-out-nationa,14356/

Tue, 10/05/2010 - 14:04 | 626556 SheepDog-One

Infinity bonds next! Full retard mode in full swing, very dangerous here! You NEVER go full retard!

Tue, 10/05/2010 - 14:45 | 626753 infotechsailor

   .ROFL ROFL:LOL:ROFL:ROFL.
   ---------^-------
L / [] \
O === FRB /
L \-------------------
   __I___I__,

   | |
   | |
   __X_
   / $ \
   \____/

Tue, 10/05/2010 - 15:25 | 626962 Buckaroo Banzai

THE ROFLCOPTER GOES LOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOL

LOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOOLOL

LOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOL

Tue, 10/05/2010 - 18:07 | 627473 Conrad Murray

+55K

Tue, 10/05/2010 - 14:07 | 626571 Shameful

Yes! I want to see more countries do this. I NEED to see what a 100 year Treasury sells for. Why not sell a 100 year, after all 30 year isn't getting paid back either.

Tue, 10/05/2010 - 14:10 | 626572 hedgeless_horseman

100 years is nothing, Tyler. The zero coupon Federal Reserve Notes in my pocket NEVER mature. Never is infinitely better than 100 years.

Tue, 10/05/2010 - 14:26 | 626691 citationneeded

+ 1/0

Tue, 10/05/2010 - 14:08 | 626576 pragmatic hobo

hey ... I'll be able to calculate my cash flow for next hundred years!

Tue, 10/05/2010 - 14:11 | 626586 Everyman

THIS IS JUST GETTING RIDICULOUS. DO THESE "ECONOMIC WIZARDS" ACTUALLY BELIEVE THIS CARP THEY CONTINUE TO ROLL OUT?

THIS MAKES NO SENSE. HOW THE HELL DO THEY KNOW WHAT IS GOING TO HAPPEN IN MEXICO OVER THE NEXT HUNDERD YEARS????

Mexico is a narco-state, and out of their 107 million polulation 28 million have left to go to the US.

And these idiots sell a 100 year bond on that????

Tue, 10/05/2010 - 14:16 | 626629 Dr. No

The seller is not the idot. It is the BUYER.

Tue, 10/05/2010 - 14:22 | 626658 AccreditedEYE

+1 They are probably putting together a CDS simultaneously that will be bought off balance sheet. This system is such a rigged game it's pathetic. What the F ever happened to the risk/reward relationship. So much for bond vigilantes these days.... their horses are dead and their guns full of blanks.

Tue, 10/05/2010 - 14:38 | 626737 hambone

The seller likely is the buyer? Left hand, meet right hand.

Tue, 10/05/2010 - 14:51 | 626814 Dr. No

The great thing about sovereign paper is the endless supply. Demand is up and supply just keeps coming. Keeps prices low. Of course when demand drops.....

Tue, 10/05/2010 - 18:09 | 627479 Conrad Murray

Here's an insider view of the thought process:

http://www.youtube.com/watch?v=7edeOEuXdMU

Tue, 10/05/2010 - 14:14 | 626609 Mercury

Forget the consol, go right to the tontine: http://en.wikipedia.org/wiki/Tontine

Tue, 10/05/2010 - 14:15 | 626618 hambone

What is going on? I really don't recognize this place. Where are we going and why did someone think we wanted to go there?

Tue, 10/05/2010 - 14:15 | 626619 Everyman

BTW did anyone see this? What is the FAZ/FAS ETF trading on now???

http://blogs.stockcharts.com/status/2010/10/oct-5th-2010-1045am-russell-....

Oct. 5th, 2010 @ 10:45am - Russell Index Update By Chip Anderson Data Circuits

Yesterday, Russell decided to discontinue several of their index products. That caused problems for our data vendor which resulted in all of the Russell indexes missing data on Monday.

Russell has discontinued the following indexes:

$RMC Russell MidCap Index
$RDG Russell MidCap Growth Index
$RMV Russell MidCap Value Index
$RIENG Russell 1000 Energy RGS Index
$RIFIN Russell 1000 Financial Services RGS Index
$RITEC Russell 1000 Technology RGS Index

Is this legal????

Tue, 10/05/2010 - 14:19 | 626645 Ungaro

I think FAS and FAZ are pegged to XLF.

Tue, 10/05/2010 - 14:15 | 626620 Ungaro

So????? The Fed has been issuing perpetual, zero-coupon notes (we used to call them Quayle bonds: no interest, no maturity) since 1913. You probably have some in your wallet.

Tue, 10/05/2010 - 14:20 | 626648 TraderTimm

*Throws up hands*

100 years. Unbelievable. What, so you give this piece of paper to someone in your family hoping they will be able to collect? Is this whole planet insane?

Tue, 10/05/2010 - 14:20 | 626651 john_connor

"Perpetual bonds will be issued until morale improves and multiple Ipads are purchased."

Tue, 10/05/2010 - 14:31 | 626712 sweet ebony diamond

The perpetual no interest rate bond will surely be the financial crack Nancy & Barney have been loooking for.

Tue, 10/05/2010 - 14:21 | 626659 CheapKUNGFU

The best kind of debt to create is one that is 'supposed' to be paid/rolled in a currency that wont exist (defaults) when its time to roll... get it?\

brilliant really when you think about it...

All your 100 years are belong to us, make your time...

CKF

Tue, 10/05/2010 - 14:26 | 626686 Internet Tough Guy

US Dollar plunges to Nearly 2year low against Turkish Lira.

Seriously, I just saw that headline. Not making it up.

Tue, 10/05/2010 - 14:28 | 626701 lsbumblebee

"Okay, okay, and a free bottle of Jose Cuerva too."

Tue, 10/05/2010 - 14:32 | 626713 Stevm30

Who in Gods name would buy this trash over gold, silver, property, food, land, toilet paper, duct tape, or really... anything?

Tue, 10/05/2010 - 15:30 | 626983 fiftybagger

Ummmm, pension, retirement, and mutuals funds which are run by criminals who are on the same payroll as the crooks selling this trash....

Tue, 10/05/2010 - 16:24 | 627156 NotApplicable

You are, of course (via proxy).

What's in your wallet?

Why it's Bernanke's hand!

Tue, 10/05/2010 - 14:38 | 626746 ZeroPoint

Who the hell bought these? Is the 1000 year bond next?

Tue, 10/05/2010 - 14:43 | 626771 Captain Willard

Well, Mexico CDS are 117bp.

Buy 100 year, buy protection, lock in spread, shot of Cuervo, salt, lime. Of course, you will have to roll your CDS after a few years, if you can.

Repeat, until the next crisis. Last time they defaulted, we bailed them out anyway.

Tue, 10/05/2010 - 14:45 | 626780 TheGoodDoctor

In the year 2000, in the year 2000!

Tue, 10/05/2010 - 16:31 | 627168 PhattyBuoy

In the year 2110, in the year 2110!

Tue, 10/05/2010 - 14:51 | 626811 reading

So basically, just today, the things I need to buy likely inflated about 1.5-1.8%, the dollars I have to buy them with deflated about 1%. I didn't get a raise today and the interest on my mortgage didn't go down, but the "value" of my 401k might have gone up about 1.8% -- getting me right back where I was in 2001 -- of course that college tuition I have to pay has gone up about 100% since then -- wow, I'm feeling super rich right now and I am going out to buy an iPad.

Actually, scratch that I'll take one of those mexican century bonds instead.

Tue, 10/05/2010 - 15:11 | 626904 omi

My immediate thought is that 100 years are awesome.

If GS buys those 100s and Mexico lowers rates, say form 4.5 to 3.5, that bond can appreciate much more than 30 year bond. I look at this purely as a recommendation emminating from traders, which is consistent with GS being run by traders as opposed to investment bankers now.

Tue, 10/05/2010 - 15:12 | 626907 Kurtieboy