Mexican Citigroup unit Acciones y Valores is expected to roadshow this week a peso-denominated deal backed by the sovereign's cross-border 8.375% notes due 2011. This is the first bond of its kind in Mexico, with Deutsche Bank and Credit Suisse both having registered similar programs that have yet to produce a transaction. The impetus behind these simple CDOs is arbitrage. "The swap curve makes the arbitrage attractive," said a source close to the deal that is in the market.

The bond will be sized at up to Ps4 billion ($376 million) and will be a virtually exact mirror of the underlying collateral, except that the denomination is in pesos and payments will lag the collateral's coupon dates by a couple of days. A currency swap is being provided by Banamex, which owns the arranger. Pricing could come as early as this week.

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