Venezuela

Bets on a Venezuelan default are climbing as international reserves slump toward $10 billion amid anti-government protests and President Nicolas Maduro’s push to rewrite the constitution. The implied probability of the country missing a payment over the next 12 months rose to 56 percent in June, according to credit-default swaps data compiled by Bloomberg. That’s the highest level since December, Bloomberg News reported. The odds of a credit event over the next five years increased to 91 percent last month.

Tuesday in Venezuela, armed groups attacked Congress and a police helicopter may or may not have dropped grenades onto the Supreme Court. Wednesday’s reaction from traders? Mostly a shrug. Venezuela’s benchmark bonds due in 2027 edged higher, while notes from the state oil company coming due this year were a hair lower, Bloomberg News reported. The cost to insure sovereign debt from default dropped the most in a month.

In the wake of Goldman Sachs’s controversial purchase of $2.8 billion of bonds held in Venezuela’s vaults, investors have been trying to quickly figure out what other hidden assets the country might be sitting on. The stakes are high. As the central bank’s officially published foreign-reserve figure dwindles to just over $10 billion, that secretive stockpile might ultimately decide whether the nation averts default or not, Bloomberg News reported. Calculating the value of those securities, as you might expect, is tricky.

Reports of a failure to pay a debt to Russia and a requested ruling on whether such a failure constitutes a “credit event” that could trigger insurance contracts on billions of dollars of international bonds have brought Venezuela closer than ever to the brink of financial collapse.

Venezuela has been in talks with Russia about its $1 billion debt restructuring, TASS news agency quoted Venezuela's envoy to Moscow as saying on Wednesday, Reuters reported. Russia has slashed projected revenue by nearly $1 billion to reflect expectations that Venezuela may not make timely payments on bilateral loans, according to a document released by Russia's Audit Chamber on Tuesday. Read more.

Venezuela’s opposition is turning up the heat on Wall Street banks by alleging that some of the proceeds from a recent bond sale will be used to purchase weapons and help keep President Nicolas Maduro in power, Bloomberg News reported. In a letter dated June 1, Julio Borges, the president of the opposition-controlled National Assembly, said that at least $300 million in proceeds from the central bank’s “fire sale” of bonds to Goldman Sachs Group Inc. and Nomura Holdings Inc. will be used to purchase weapons from Russia.

Investors’ hunger for yield can appear callous when people are genuinely starving. One of the more anomalous trades in emerging market debt originates in Venezuela, the South American nation in the midst of a brutal economic meltdown that has resulted in a malnutrition outbreak. Against the odds, the country has been intent on servicing its financial obligations — dubbed “Hunger Bonds” by Ricardo Hausmann, a former Venezuelan official, the Financial Times reported.

Massive anti-government protests in Venezuela that have left about 30 people dead couldn’t stem the biggest rally in two years for the country’s bonds, Bloomberg News reported. Despite food and medicine shortages, the government has reiterated its willingness to stay current on debt, and state oil company Petroleos de Venezuela SA made good on a $2.2 billion bond payment last month. The implied probability of the country missing a payment in the next 12 months fell to 50 percent from 56 percent at the end of March, according to credit-default swaps data compiled by Bloomberg.

Venezuela was once among the most lucrative markets in Latin America for foreign businesses, a country oozing in oil and blessed with an emerging middle class hungry for everything modern, from new cars to snug-fitting disposable diapers. But the good times are long gone, and on Thursday, General Motors became the latest in a wave of international companies that have shut their doors voluntarily or under duress, the International New York Times reported. In G.M.’s case, the Venezuelan authorities seized the company’s local vehicle assembly plant.

Bonds issued by Venezuela’s state oil company rallied after the country made $2.2 billion in payments on notes that matured Wednesday, Bloomberg News reported. The $1.1 billion of notes from Petroleos de Venezuela that come due in seven months gained 2.1 cents to 87.3 cents on the dollar as of 3:17 p.m. in New York. The payment, which was confirmed by Delaware Trust Company, strengthened investor confidence that the nation can avoid default for yet another year.