CORRECTED-Venezuela rout turns into opportunity

viernes 12 de septiembre de 2014 13:39 GYT

(Corrects size of debt maturities in 2017 to US$5bn)

By Paul Kilby and Davide Scigliuzzo

NEW YORK, Sept 12 (IFR) - Venezuelan bonds came under pressure this week as talk of a potential default spooked the markets, causing the sovereign's curve to plunge several points before buying interest returned.

The country's 2024s fell about 3.5 points to 65.00-66.00 on Monday, marking a five-point drop in four days. It was a similar story for bonds issued by state-owned oil company PDVSA, whose 2024s touched a low of 52.50-53.00 on the same day.

The rout was triggered by an article written by two Harvard academics - a former Venezuelan minister and an ex advisor for the opposition - questioning whether the government should service its international bonds when it is not honouring other commitments at home and has left citizens scrambling for basic goods.

Looming debt payments in October totalling some US$4.5bn between the sovereign and PDVSA only served to heighten concern around Venezuela, which faces another US$5bn spike in maturities in 2017.

The sell-off came on the heels of a similar dip in prices caused the week before by a cabinet reshuffle in which market favourite Rafael Ramirez was ousted from his post as head of the country's economic team and president of PDVSA.

The move towards a more left-leaning administration dashed hopes that the government would act to tackle its deteriorating fiscal situation ahead of legislative elections next year.

However, as spreads on the sovereign approached highs seen earlier this year, and yields on some instruments reached close to 20%, some market participants saw buying opportunities.   Continuación...