Venezuelan Bonds Get a Boost Amid Signs of US Policy Easing
Venezuelan migrants jailed in El Salvador disembark at Simon Bolivar International Airport in Maiquetia, Venezuela on July 18.
Photographer: Federico Parra/AFP/Getty ImagesTakeaways by Bloomberg AI
- A prisoner exchange and reports of easing US restrictions on Venezuela's oil sector are affecting the market for the country's dollar bonds.
- Venezuelan dollar bonds maturing in 2027 rose in value, trading at almost 22 cents on the dollar, after the prisoner exchange and reports of the US granting Chevron Corp. permission to pump oil in Venezuela.
- According to analysts, including Ramiro Blazquez and Guillermo Guerrero, the developments may lead to resumed negotiations, but it is premature to say a debt restructuring is viable.
A high-profile prisoner exchange and reports of easing US restrictions on Venezuela’s oil sector are jolting the usually idle market for the South American nation’s dollar bonds.
The country’s sovereign notes, in default for years, got their first boost on Friday following a deal to release 250 Venezuelans jailed in El Salvador in exchange for 10 American citizens. The notes then extended their gains on Thursday amid reports that the US had granted Chevron Corp. permission to pump oil in Venezuela.
Venezuelan dollar bonds maturing in 2027 rose more than a cent on Thursday, trading at almost 22 cents on the dollar, a level not seen since February, according to indicative pricing data compiled by Bloomberg.
Traders viewed the prisoner exchange last week as an opening for further negotiations, which could set the ground for an eventual debt restructuring at a later point in time. Those hopes were confirmed when the Wall Street Journal first reported the Chevron deal. While important details are still missing, key to the arrangement was an assurance that no royalties or taxes would benefit the country’s socialist leader.
Read more: US Allows Chevron to Restart Pumping Oil in Venezuela
The prisoner release and the Chevron news mark a breakthrough in a yearlong political gridlock between the two countries, ever since Nicolás Maduro was announced as the winner of last year’s presidential election despite evidence of vote fraud. So far, US President Donald Trump seems to have favored Secretary of State Marco Rubio’s tougher stance on Venezuela over that of the more pragmatic Richard Grenell, a special situation envoy who has negotiated other deals with Caracas.
Venezuela's Bonds Rise on Prisoner Swap, Oil License
Source: Bloomberg
Back in May, Trump let expire a license that allowed Chevron to produce and sell Venezuelan oil, sparking a swift economic deterioration in the country. Inflation spiked, while authorities struggled to keep the exchange rate stable as dollar supply from oil companies came to a halt.
But the news of the fresh permit for Chevron signal that the situation is back to what it was before, StoneX analyst Ramiro Blazquez said. “Negotiations are very likely going to resume. The fact that Rubio is playing a role in all of this suggests a moderation in his hawkish stance.”
It’s not the first time bondholders get their hopes up. Venezuela and the US have engaged in talks several times this year, ending with the release of multiple prisoners. Signs of a detente have repeatedly faded just as quickly as they’ve appeared, with sanctions forbidding Venezuela from accessing US capital markets to eventually carry out a restructuring of its debt.
“A lot has to happen before a restructuring is viable and I think it’s premature to even say we’re on the right path there,” said Guillermo Guerrero, head of research at EMFI Securities.
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