Venezuelan bonds rallied after Finance Minister Rodolfo Marco Torres was said to have told investors in New York that government entities own about a quarter of the nation’s foreign bonds, spurring optimism that the nation will avoid default in the near-term.
Government bonds due 2018 gained the most since August, climbing 1.2 cents on the dollar to 58.5 cents at 10:40 a.m. in New York. The average yield investors demand to own Venezuelan bonds over U.S. Treasuries fell 0.41 percentage point to 30.88 points, according to JPMorgan Chase & Co. data.
Torres told investors Wednesday that the government owns as much as 25 percent of the nation’s total debt stock, without providing details on which bonds it bought, and said officials are weighing liability-management proposals, according to two people with knowledge of the matter who asked not to be identified because the meeting was private. That’s a bigger holding than investors had expected, assuming the bulk is in the shorter-dated debt, and is reducing odds that the government will default over the next three years, according to BancTrust & Co.
“Even if we assume the stock to be distributed along the entire curve, it still gives ground for a rally,” Guillermo Quiroga, an analyst at BancTrust, said in an e-mailed response to questions. “It reduces default probabilities and encourages further buyback expectations.”
The government has about $5 billion in bond payments due in the last three months of this year and about $10 billion due in 2016. In total, Venezuela has about $70 billion in outstanding dollar-denominated debt securities, including bonds issued by state-owned oil company Petroleos de Venezuela SA, according to data compiled by Bloomberg.
Because the total debt stock is sizable, it’s “highly implausible” that the government has bought back as much as a quarter of it, said Francisco Rodriguez, an economist at Bank of America Corp. It’s more likely that government entities own about a quarter of the nation’s short-term bonds, which would amount to about $3.5 billion of bonds due through 2017, Rodriguez said. He estimates that the government owns about 14 percent of the total debt stock.
The government is seeking to reengage with investors and meet with them more frequently, the people said. Torres said that after several months of failing to provide economic data ranging from inflation to economic growth, the government plans on improving its data transparency, according to the people. That same day, the government filed an annual report with the the U.S. Securities and Exchange Commission that included economic data for 2014. It didn’t release any statistics for 2015.
Venezuela said in the filing that it has “taken actions focused on improving its debt payment profile, with the goal of reducing concentration through extension of maturities.”
“We talked about Venezuela’s commitment to meeting international obligations and the complete confidence they can have in our bonds,” Torres said Wednesday in a Twitter post. He also wrote that he met with investors including Pacific Investment Management Co., Fintech Advisory Inc. and TCW Group Inc.
Deutsche Bank AG arranged the meeting, the people said. The Finance Ministry declined to comment, as did Troy Gravitt, a spokesman for Deutsche Bank.