Chavez Saber Rattling Knocks Bonds

Venezuela’s increasingly heated diplomatic row with Colombia has dented secondary bond markets, where both sovereigns underperformed Monday. The Vene 2027 closed off two points at around 97 down from 99 on Friday, according to traders. Colombia 2037s meanwhile dropped 1.5pts to 105, while PDVSA 2017s surprised by outperforming the Vene sovereign, closing up around 3pts at 67. Ecuador, which also weighed in against Colombia in the spat, was seen trading lower. The Vene local market meanwhile saw significant flow. “A lot of people were looking for cash,” Abramo Di Luca, director at Italbursatil Casa de Bolsa in Caracas tells LatinFinance. “There was a lot of nervousness”. The government nonetheless continued today with the sale of notes in US dollars from a pool of debt including the Argentina and Ecuador sovereign. The bonds are highly sought after by Venezuelans desperate for hard currency. “I really think that the market will adjust itself again,” Di Luca says. “But is important to see the attitude and the explanation of the government in the coming days.” The storm is expected to eventually blow over, though there is risk of further escalation short term.