The 100-year view

AT THE beginning of April international investors made two whopping bets by snapping up the first ever 100-year bond denominated in euros. The first bet was that the euro would still exist a century from now. No bookie would give short odds on that. The second was that the issuer, Mexico, which suffered three long cycles of boom and bust in the past century, would continue to be creditworthy for the next 100 years.

Mexicans, whose country has, as one economic historian puts it, lived longer in moratoria than with access to capital markets, reacted with bemusement. A typically gloomy columnist predicted that, since Mexico will have run out of oil by 2115, it will have to sell off the country’s extremities to repay the bondholders.

Foreign creditors are more bullish. Over the past five years they have extended the equivalent of more than $5 billion of 100-year bonds to Mexico in three currencies: dollars, sterling and now euros. It is the only country to have tapped the so-called centennial market since China and the Philippines in the 1990s, and it has done so at relatively low yields—of 6.1% on its dollar bond in 2010 and just 4.2% on...

via The Economist: Finance and economics Business Feeds

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