Article

2019-01-25 Caribbean-Latin America

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 03:40|| || Front Page|| [11133 views ] Top

#1 Is the apparent infatuation with Venezuelan 'regime change' based on defaulted bonds and investments? Should we be 'following the money'.....?

Posted by Besoeker 2019-01-25 03:44|| 2019-01-25 03:44|| Front Page Top

#2 They should be following a new leader.

Posted by newc 2019-01-25 03:54|| 2019-01-25 03:54|| Front Page Top

#3 Why should the people be stuck with the 'promises' of a prior corrupt regime? Seems to me, the backers who bought the bonds are as guilty of crimes of the prior regime as those who carried it out. See - terrorist financiers.

Posted by Procopius2k 2019-01-25 07:11|| 2019-01-25 07:11|| Front Page Top

#4 The 'investors' may have held the Kissinger view. Pump enough money into the system, perhaps it will morph into a Jeffersonian democracy.

Worked so well in China.

Posted by Besoeker 2019-01-25 07:16|| 2019-01-25 07:16|| Front Page Top

#5 IIRC it was a large New York based bank selling the bonds. They were criticized for propping up Maduro with the funds. They were also warned that the bonds may eventually be worthless.
I personally hope the banks takes a loss on the bonds.

Posted by jvalentour 2019-01-25 08:56|| 2019-01-25 08:56|| Front Page Top

#6 I personally hope the banks takes a loss on the bonds

And that we (the public) don't bail them out.

Posted by Mullah Richard 2019-01-25 12:51|| 2019-01-25 12:51|| Front Page Top

#7 Those bonds should be zeroed out by the next government.

Tie their asset value to that looted by the previous regime and families.

Posted by Bright Pebbles 2019-01-25 14:59|| 2019-01-25 14:59|| Front Page Top

#8 There's a reason securities like this are called 'junk bonds'.

Posted by Raj 2019-01-25 17:32|| 2019-01-25 17:32|| Front Page Top

#9 Brokers are trying to sell junk bonds for a second time to the credulous? They make money in transaction fees and don't care if the sucker loses...

Posted by magpie 2019-01-25 20:53|| 2019-01-25 20:53|| Front Page Top

07:54 Grom the Affective
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