Venezuelan Bonds Bake In Permanent Default

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Bonds investors are finally acting like they’ve lost hope that Venezuela will make any future debt payments, The Wall Street Journal reported. Traders debated for weeks about whether to continue pricing the oil-rich country’s sovereign debt with the assumption that it would keep making interest payments. But as the pile of unpaid coupons racked up, the association for emerging market debt traders this week threw in the towel and announced that from now on, the market should assume Venezuela isn’t likely to pay. The change in market pricing superficially bumped up prices on average, according to BondTicker data, as bonds began being priced without the assumption that buyers would pay sellers for accrued interest. The country is behind on several payments, particularly for its sovereign bonds. But some payments have been arriving late and the country has not said it plans to default on its debt. The situation has made it difficult for traders to determine if bonds should trade as if the country is in default or as if they will keep paying. Read more. (Subscription required.)