Venezuela bonds

By Russ Dallen of Caracas Capital Markets

Investing in Venezuela has always been like praying mantis love. On first acquaintance, Bolivarian Venezuela has those big, beautiful Miss Venezuela eyes and those angelic clasped praying hands inspiring trust and confidence, all backed up by glorious profits and yields. But while other investors in Venezuela – from oil companies, to airlines, to consumer products corporations – have been lured to their demise, bondholders have until the past two years been spared from most praying mantis cannibalism, and the action for bondholders has been great! Even if Venezuela has not paid shareholders of ExxonMobil, ConocoPhillips, or the Koch brothers’ Fertinitro, Venezuela paid the bondholders handsomely! Always! But then came the first sign of trouble, from steel company Sidetur, which the Venezuela government expropriated in 2013 and then didn’t pay its bondholders (or shareholders). Read more

By Russ Dallen, Caracas Capital Markets

Trying to predict what will happen in South America’s wildest emerging markets in 2015 has the degree of difficulty of trying to compute pi to the 100th digit in your head.

With Venezuela, in particular, the range of options of what could happen next year is almost as infinite – ranging from more of the same and muddling through, to default, violence, coup, civil war and international brigades. On the economic front, whether Venezuela survives 2015 will depend almost purely on the price of oil, however. Read more

Last week, Cleary Gottlieb – the US law firm representing Argentina in its debt negotiations – held a packed closed-door session on Venezuela. The question of the day was: what if Venezuela defaults? This week, the US Senate passed a bill that seeks to sanction Venezuelan officials for alleged human rights violations. Although these two events are not obviously related — and the sanctions bill still has to be approved by Congress, and signed into law by Barack Obama — they could become so. They both also illuminate the horrible mess that Venezuela could be heading into. Read more

Among the many woes afflicting Venezuela, one of the most pressing is the rapid decline in its reserves of hard currency. These fell from some $29bn at the start of 2013 to a low of about $19bn last week. But Beijing’s generous hand has since boosted them to $23.5bn, according to the central bank.

The fall in reserves had raised concerns about Venezuela’s ability to pay its debts, so the influx brought some relief to rattled markets, fuelling a small rally off recent lows in Venezuelan bonds, which remain among the highest yielding in the world.

But is the influx all it appears to be? Read more

By Pan Kwan Yuk and Andres Schipani

Thumbing his nose at critics, Venezuela’s finance minister, Rodolfo Marco Torres, said on Wednesday via a series of tweets that the socialist government has paid a $1.5bn government bond that was due.

As fastFT reported, Mr Torres took to Twitter, under the hashtag #VenezuelaSeRespeta, or Respect for Venezuela, to write:

Acknowledging the instruction of our president Nicolás Maduro, today we paid #GlobalBond2014 #RespectForVenezuela

Today we paid $1.561.665.000 in capital and corresponding interests of #GlobalBond2014 #RespectForVenezuela

The Boliviarian government shows its commitment to the Motherland and the capacity to honour its obligations #GlobalBond2014 #RespectForVenezuela

 Read more

Venezuela’s state-run oil giant, PDVSA, is calling on bold bond-buyers in the financial sector – and traders say they have already been receiving calls.

The company announced on Wednesday it is to issue $5bn in new bonds, that will mature in 2022, 2023, and 2024 with a 6 per cent coupon, in a private placement with the public banking sector. Read more

President Nicolás Maduro is a fraud, his government is incompetent and corrupt, most ministers should be sacked, the ruling Socialist Party’s ideological discourse is sterile, the national “Bolivarian” project is on a suicide path, and there is a growing risk of a coup from within the administration.

But don’t believe the FT on any of this. These are the words of Heinz Dieterich, a Marxist professor and former mentor of Hugo Chávez, writing in the leftist website Aporrea. Having cleared our throats before Sunday’s municipal elections, what actually is at stake at the vote — in concrete terms? Read more

Roll up, roll up, come get your Venezuelan bonds.

That appears to be the message from Venezuelan oil minister Rafael Ramirez, who said on Tuesday that state-owned oil company PDVSA will sell $4.5bn in bonds this weekRead more

How Venezuela has changed since Hugo Chavez died. What would the raucously anti-imperialist leader have made, for example, of the photograph taken on Wednesday of Venezuela’s foreign minister looking like a bashful teenager beside his apparently rather aloof US counterpart, John Kerry?

Before long, bankers will probably get a photo opportunity too, this time with Venezuela’s finance minister, Nelson Merentes (pictured), who will soon set off on a roadshow in the US and Europe for the first time in almost a decade. Read more

Once again, the unusual economic management of Venezuela’s socialist government seems to end up benefiting the “evil capitalists” on Wall Street more than ordinary Venezuelans themselves.

Although the introduction of a new foreign exchange mechanism next week doesn’t look like its going to go very far in solving the various problems facing Venezuela’s economy – not least shortages of foreign currency, and therefore of imported goods – it is good news for bondholders. Read more

News that Hugo Chávez’s health has taken a turn for the worse didn’t solicit much of a reaction from the markets. Prices on Venezuela’s dollar sovereign bonds barely budged on Tuesday. Could that be because after nearly three months of twists and turns, investors have pretty much decided that the end of Chávez is near? Read more

For all the moaning in Venezuela about last Friday’s devaluation (which the most cynical critics were saying was absolutely essential, until it happened, and then it became a disaster), there is at least one group of people who are fairly content with the development: investors in Venezuela’s dollar bonds.

Once again, a move by Venezuela’s socialist government was in lockstep with the interests of those arch-capitalists on Wall Street. Look no further than the reaction of Venezuela’s sovereign bonds on Monday, with benchmark yields falling to a five-year low. Read more

a demonstration in support of Venezuelan President Hugo Chavez, December 15, 2012New Year in Venezuela is a curious occasion at the best of times – traditions include jumping off chairs backwards, running round in circles carrying suitcases and wearing yellow underwear.

But with half the country petrified that their beloved leader may be about to depart this world, and the other half desperately hoping that they may be on the verge of a new era, there was less time for the usual eccentricities. Read more

Classic Chávez: just when people were beginning to suspect that he was at death’s door, sending bond prices through the roof on Thursday when it transpired that he couldn’t make the Mercosur summit, Venezuela’s mercurial leader suddenly reappeared.

As if to spite his naysayers, at 2.30am on Friday morning he turned up at Caracas airport, seemingly in good humour, joking with his family and closest aides, even discussing poetry. Not exactly what the more dire rumours were suggesting. Read more

It was meant to be a big day: a chance for Hugo Chávez to celebrate Venezuela’s glorious accession to the South American trade bloc, Mercosur, while making a triumphant return to the regional stage from which he has been startlingly absent for the last year and a half thanks to his battle with cancer.

It’s hardly like Venezuela’s gregarious leader to turn down that kind of opportunity, so it’s no surprise that markets got so worked up on Thursday, which saw the biggest surge in Venezuelan bonds in two years, with yields falling to their lowest level in almost five years. Read more

Ever since his re-election on October 7th, Hugo Chávez has been uncharacteristically absent from the public eye. As if anyone had been in any doubt, we now know why.

Although he claimed to be cured from cancer in July, a letter from Chávez was read out in congress on Tuesday in which he said that he had been following a “complementary treatment plan” ordered by his doctors and is now on his way to Cuba for further “special” treatment. Read more

With Venezuela’s presidential elections now well behind us, speculation has been growing on Wall Street that the government may issue new debt soon.

But finance minister Jorge Giordani seemed to poor cold water on the idea in an interview published on Monday, arguing that Venezuela is trying to decrease its dependence on international markets. Read more

As was expected, Venezuelan bonds fell on Tuesday after Hugo Chávez was re-elected on Sunday, correcting a rally founded on hopes that his more market-friendly rival, Henrique Capriles, might win.

Well, he didn’t – much to the despair of the 6.5m Venezuelans who voted for him and who are now in mourning as they wait for signs as to what course Chávez’s fourth presidential term could take: further radicalisation of his socialist revolution, or national dialogue and reconciliation in this hyper-polarised country. Read more

International fixed income traders are braced for a fall in Venezuelan bonds following president Hugo Chávez’s comfortable victory in Sunday’s election.

Even though the margin was far smaller than in his previous three wins, it was more than enough to see off the challenge from young opposition candidate Henrique Capriles, who secured 45 per cent against 54 per cent for the veteran socialist leader.

While investors were divided before the poll about the likely result, there was enough money betting on a Chávez defeat to suggest that Venezuelan assets will now fall, though the full picture may not emerge until Tuesday, since Monday is a public holiday in the US, the largest foreign market for Venezuelan paper. Read more

No one is revelling more in Hugo Chavez’s struggle with cancer than investors in Venezuelan bonds, which have rallied a remarkable 35 per cent in the past four months.

This may seem morbid, but never let it be said that Venezuela’s canny leader doesn’t know how to make the best out of a bad situation.

 Read more