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Venezuela's defaulted bonds gain luster on regime change hopes, says economist
[Market Watch] Investors see fresh opportunities in Venezuela’s defaulted government bonds in a wager that recent unrest in the inflation-ravaged country could spark regime change and an eventual restructuring of its debts.On Wednesday, the leader of the Venezuelan legislature, Juan Guaidó, declared himself the country’s legitimate leader, after President Nicolás Maduro was sworn in for a second six-year term a few weeks ago. The U.S. recognized Guaidó as the interim leader of the country, prompting Maduro to demand all U.S. diplomats leave Venezuela. On Thursday, Venezuela’s military threw its support behind Maduro. "Yesterday’s events are likely to be followed by months of unrest, repression, and a much swifter escalation of economic sanctions by the U.S. Recent history suggests that such an environment tends to be supportive of bond prices as it fuels hopes of regime change," said Carlos de Sousa, senior economist at Oxford Economics, in a Thursday note. Such optimism has led investors to SNP up defaulted Venezuelan government paper. Oxford Economics said Venezuelan bonds have rallied nearly 40% year-to-date, with the average bond now trading at more than 30 cents on the dollar for the first time in seven months. That is around the average historical recovery value for a defaulted sovereign bond, according to Moody’s. Posted by: Besoeker 2019-01-25 |
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