Venezuelan Bonds Unchained From Oil as Presidential Vote Nears

(Bloomberg) -- The price of crude, long a bellwether for oil-rich, cash-poor Venezuela’s ability to repay debt, is anything but that these days.

The correlation coefficient between oil and Venezuela’s benchmark 2027 bond is on the verge of turning negative for the first time since January. That’s happened only three times in the past decade, apart from the three months after President Nicolas Maduro called for a debt restructuring in November.

The divergence reflects investors’ lack of faith in Venezuela’s ability to repay bonds as the government and state-run oil company blow past deadlines on $3.7 billion in debt. While opposition candidate Henri Falcon, who’s promised to carry out a debt restructuring if elected, leads some polls by double digits ahead of the nation’s May 20 presidential vote, few expect him to win amid an opposition boycott and less-than-fair conditions.

Barring an upset, it’s unlikely that the U.S. Treasury Department would loosen sanctions that prohibit a restructuring. The measures were drafted, in part, with the intention of booting Maduro from office.

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