Defaulted Venezuelan “Hunger Bonds” Rally As Maduro Clings To Power

Thursday, January 24, 2019
By Paul Martin

by Tyler Durden
ZeroHedge.com
Thu, 01/24/2019

As a growing number of world leaders recognize opposition leader Juan Guaido as the legitimate president of Venezuela, defaulted Venezuelan “hunger bonds” are rallying to their strongest level in more than a year as the brutal socialist regime of Nicolas Maduro – who was sworn in earlier this month for a second six-year term – teeters on the brink of outright collapse.

Venezuela’s 2022 bonds on Thursday halted their biggest three-day rally since October, but the rally so far has been nothing short of stunning, though many LatAm investors have opted to steer clear for now.

“I prefer to stay out until things get better,” Francisco Ghersi, managing director at Knossos Asset Management, told Bloomberg. He added that Maduro – who has kicked out all US diplomats and insisted that he will retaliate against demonstrators – will do “whatever it takes to be in power.”

While Maduro is still technically in control of the levers of power and the country’s collapsing energy infrastructure, Guaido has one key advantage: The US could unfreeze millions of dollars in Venezuelan assets and turn them over to him. The US could also impose an oil embargo on Venezuela, which would add to the financial strain from US sanctions against Maduro and his regime. In Latin America, only three countries, – Cuba, Bolivia and Nicaragua – still recognize Maduro as the legitimate leader of Venezuela.

Here’s a roundup of what analysts are saying about the bonds, courtesy of Bloomberg:

Siobhan Morden, head of LatAm fixed-income strategy at Nomura in New York:

“U.S. recognition will come with responsibilities. It’ll be a game of chicken to see if incremental pressure works for an internal rupture. If not, then look for full blown economic sanctions”
DVSA bonds could jump to 30 cents on the event of a regime change
Sean Newman, a portfolio manager at Invesco Advisers in Atlanta:

“The U.S. recognition is a game changer. It may prompt Maduro to do something radical like try to remove him, which will leave the international community no choice but tighten grip around country, leaving the military to abandon him”
Invesco owns Venezuelan bonds, but is not adding more at this moment given the spike in prices Wednesday

The Rest…HERE

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