Venezuela’s Bonds Rally as US Lifts Trading Ban
Venezuela’s Sovereign Bonds Surge Following US Trading Ban Lift
Venezuela’s sovereign bonds experienced a significant rally on Thursday after the United States lifted its ban on secondary market trading for certain eurobonds. Investors are now eyeing a potential debt restructuring for the country’s defaulted debt, which amounts to around $60 billion.
Increased Investor Interest and Rising Sovereign Debt Prices
Quotes for Venezuela’s sovereign debt surged to as high as 20 cents on the dollar, while a 2020 note from state oil company PDVSA rose by 13 cents to 66.5. Despite the substantial increase in prices over the past 24 hours, they still remain below their pre-sanction levels. Edward Cowen, CEO of Winterbrook Capital, commented that a return to Venezuela’s regular weighting on global indexes would provide further support for the prices.
US Treasury Department’s Decision and Investor Surprises
The US Treasury Department surprised bond investors by removing the ban on secondary trading of Venezuelan bonds, as negotiations between the government and opposition parties are just beginning. Armando Armenta, senior economist for global economic research at AllianceBernstein, stated that the market was caught off guard by the early removal of the ban and emphasized the importance of the Venezuelan government complying with the agreement.
Government Bans and Debt Renegotiations
A significant development will be the potential lifting of the government’s ban on the candidacy of Maria Corina Machado, the favorite in the opposition primary ahead of the presidential election. The US government has conveyed to President Maduro that all bans on opposition presidential candidates must be lifted by the end of November in exchange for sanctions relief.
Increasing Interest and Debt Renegotiation Expectations
Venezuela and PDVSA, both with over $60 billion in debt, halted payments to bondholders at the end of 2017, resulting in multiple lawsuits filed by creditors. Small funds and investors outside of the United States have shown interest in increasing their exposure to Venezuelan bonds in anticipation of debt renegotiations.
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