Search This Blog

Friday, October 31, 2014

Venezuelan Bonds Rally Most in Five Years on Devaluation Wagers

Venezuelan bonds are posting their biggest rally in five years on speculation the government is considering economic changes including a currency devaluation.

The country’s benchmark notes due in 2027 rose 2.55 cents today to 65.69 cents on the dollar at 12:11 p.m. in New York, bringing the advance over the past two days to 9.6 percent, the steepest since January 2009.

The bonds gained yesterday after state-owned Petroleos de Venezuela SA paid $3 billion of maturing securities, reassuring investors who had been pricing in a possibility of default.

Venezuela will likely devalue the bolivar’s official 6.3 per dollar peg in early January and may also allow state-owned oil exporter Petroleos de Venezuela SA to sell export dollars on the Sicad II market, generating more income, Washington-based political consultancy Eurasia Group wrote today in a note.

“These measures have been part of the public debate for the best part of a year,” said Siobhan Morden, the head of Latin American fixed-income strategy at Jefferies Group LLC.

“You don’t want to be underweight in case they do adopt them, but the question is whether they will implement them and the track record is poor.” President Nicolas Maduro may lack the political strength to implement measures that would risk pushing up the price of imports, Morden said.

The government’s Information Ministry declined to comment. Venezuela has ruled out selling Citgo Petroleum Corp. its oil refining business, Finance Minister Rodolfo Marcos Torres told Caracas-based El Universal in an Oct. 26 interview.

The country may still sell Citgo and is considering financing options including a possible loan of several billion dollars, according to Eurasia.

bloomberg.com

No comments:

Post a Comment