Mila acquired the position in PEMEX (Petroleos Mexicanos) bonds:

You are asked to help Mila to 'hedge it' as she will be on holiday for 2 weeks. Due to the liquidity constraints, you can't straight away sell these bonds into the market, but you need to protect your book from losses.

What are the main risks associated with this position? What hedges would you put on to protect your book from adverse movements of the market? Assume theres no other exposure to PEMEX or Mexico on the book. (Consider what risks are these bonds exposed to and what financial instruments and derivatives are available to mitigate those). Please provide the hedge specifics (notionals, maturities, etc) where possible. Is it a perfect hedge?

Bond notional (USD m) Ticker Coupon Maturity Currency Price PEMEX PEMEX PEMEX 5.95 28/01/2031 USD 6.95 28/01/2060 USD 6.5 13/03/2027 USD 101.65 102.50 107.75 Bond notional (USD m) Ticker Coupon Maturity Currency Price PEMEX PEMEX PEMEX 5.95 28/01/2031 USD 6.95 28/01/2060 USD 6.5 13/03/2027 USD 101.65 102.50 107.75