Mexico is preparing to sell up to $10bn of debt to help bail out Pemex, the indebted state oil company that has fallen behind on billions of dollars of payments to suppliers, people familiar with its plans have said.

Pemex’s bonds rallied as President Claudia Sheinbaum’s government said on Tuesday it was planning the sale as part of “a series of measures” to support the company in managing and improving its balance sheet. The yield on Pemex’s bond due 2050 fell from about 10 per cent to 9.6 per cent after the debt sale plan was announced.

Once a cash cow for Mexico, Pemex has increasingly been a drag on the country’s finances. Production has fallen to record lows while debt is the highest of any oil group in the world, presenting Sheinbaum with one of her most pressing political challenges.