June 22, 2016 / 7:47 PM / in 2 years

Political rumors help PDVSA bonds rally

NEW YORK, June 22 (IFR) - Bonds issued by Venezuelan oil company PDVSA rallied Wednesday after a former Caracas mayor was quoted discussing the possibility of President Nicolas Maduro’s resignation.

The mayor, Juan Barreto, is not thought to have direct access to Maduro, who has seen thousands of Venezuelans sign a petition to oust him in the face of a deep economic crisis.

Maduro has not publicly spoken of resigning. But Barreto is a member of Maduro’s PSUV party, and the local report citing him was enough to buoy PDVSA’s bond prices.

“Resignation rumors coming from a radical like Juan Barreto very important,” Jorge Piedrahita, CEO of broker Torino Capital, wrote in an email to clients on Wednesday.

The short-end of the PDVSA curve enjoyed decent volumes, with some bonds jumping up to 1.5 points before giving back some gains as oil prices retreated below US$50 per barrel.

PDVSA 7.25% 2017s were being quoted at 62.50-63.00 in afternoon trading, while the PDVSA 8.5% 2017s were spotted at 69.50-70.00 after breaching the 70.00 mark earlier in the day.

“There is no way to verify this, but it shows that Maduro’s authority is weakening if there are outspoken critics within his own party discussing the prospects of his resignation,” Siobhan Morden, head of Latin American debt strategy at Nomura, told IFR.

US diplomat Tom Shannon met with Maduro on Wednesday in an effort to restart dialogue with the Venezuelan government as the country’s economic crisis worsens.

Investors have fretted about PDVSA’s ability to cover some US$8bn in debt payments coming due this year and next. (Reporting by Paul Kilby; Editing by Marc Carnegie)

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