Venezuela

At what point does a country’s political situation become intolerable for bond investors? That is the question facing holders of Venezuela’s debt as the nation’s descent into strife raises questions about investment ethics, the Financial Times reported. This week, Credit Suisse circulated a memo outlining a ban on trading in two Venezuelan bonds, reflecting growing unease about the reputational risks of being associated with a country under the increasingly autocratic government of Nicolás Maduro.

Credit Suisse is banning its traders from dealing with a batch of Venezuelan bonds, fearing any potential reputational fallout from being seen to support the increasingly autocratic government of Nicolás Maduro, the Financial Times reported. Goldman Sachs was earlier this year lambasted by the country’s opposition for its asset management arm’s purchase of $2.8bn worth of Venezuelan bonds issued by the state oil company, PDVSA, which opposition members said amounted to a financial lifeline for the authorities.

Predicting when Venezuela will finally default has been a decade-long parlor game for bond buyers, but recent events add urgency to the exercise, Bloomberg News reported. After years of mismanagement, the country appears closer and closer to running out of money. Adding to investors’ concern is the increasingly anti-democratic turn of President Nicolas Maduro, whose move to rewrite the constitution and strip power from congress has been met with U.S. sanctions.

Russia’s largest oil company disclosed another advance payment to Venezuela’s state producer after the U.S. sanctioned President Nicolas Maduro on Monday, Bloomberg News reported. Rosneft PJSC paid $1.02 billion to Petroleos de Venezuela SA in April for future crude supplies, the state-run Russian producer said in an earnings statement on Friday. That follows advance payments of about $1.5 billion in 2016 and comes a day after Rosneft Chief Executive Officer Igor Sechin pledged to stick with investment plans in the crisis-torn Latin American nation.

Venezuela’s state oil company, ensnared in the political crisis gripping the country, is asking bond investors for a temporary waiver from financial reporting requirements because it can’t complete the documents on time, Bloomberg News reported. Petroleos de Venezuela asked trustee Mitsubishi UFJ Financial Group Inc. for an extension to Aug. 11, at which point it expects to make the documents available, according to a letter dated July 31 that the bank sent to holders of notes due in 2020.

Investors have been bracing for a Venezuela debt default for more than a year, but fallout from the country’s widely criticized election last weekend could prove to be the tipping point, The Wall Street Journal reported. The government and state-owned oil company Petróleos de Venezuela SA, also known as PdVSA, together owe $5 billion in principal and interest payments due between now and the end of the year, according to Caracas Capital Markets. The country has $725 million due this month alone, the Venezuelan investment bank said.

The specter of tighter U.S. sanctions is pushing up the perception that Venezuela is getting closer to defaulting on its bonds, Bloomberg News reported. Venezuela is awaiting possible further restrictions after the U.S., its largest trading partner, sanctioned President Nicolas Maduro after he held elections Sunday for a new assembly that will rewrite the constitution. U.S.

It seems everyone has a set of demands for what should happen to Venezuela. For the most part, from the streets of Caracas to the White House, these are loud but rather vague talking points. People in the bond market, though, have begun to put together a plan for reassembling the country’s economy and finances, the Financial Times reported. Of course it would be better if Venezuelans were able to agree their own coherent plan, but that is not happening right now.

More than 7 million Venezuelans went to the polls to vote against President Nicolas Maduro last weekend. But the more consequential opinion on Maduro's future may belong to China, Venezuela's biggest creditor and one of the few likely sources of funds needed to avert a possible default later this year, a Bloomberg View reported. The unofficial referendum, which was organized by the opposition, showed the depth of popular discontent with Maduro's plans to rewrite the constitution and enshrine himself in office. Turnout, at more than a third of registered voters, far exceeded expectations.

With political and social tension in Venezuela on the rise, investors should prepare for the “end game” by seeking out the country’s lowest-priced debt, according to Deutsche Bank AG. The cheapest bonds -- which generally carry longer maturities -- will provide the best return in a scenario under which Venezuela defaults and is forced to restructure, Hongtao Jiang, a strategist at the bank, wrote in a report. Jiang said while he doesn’t expect Venezuela to stop payments this year, it’s a possibility that bond buyers need to be prepared for, Bloomberg News reported.