Venezuela's Defaulted Bonds Soar as Anti-Maduro Protests Mount

(Bloomberg) -- Venezuelan bond prices jumped to the highest in six months as large anti-government protests throughout the country spurred speculation that President Nicolas Maduro’s regime could be coming closer to an end.

As Venezuelans took to the streets, the country’s $4 billion of defaulted notes due in 2027 surged 2.4 cents to 30.7 cents on the dollar, the highest price since June. Other overseas notes from the government and state-owned oil company joined along in a broad rally.

The hope among investors is that popular dissatisfaction with Maduro will eventually lead to his removal from office and the ascension of a new government that will be able to boost oil production and get the economy back on track, paving the way for a restructuring deal after $9 billion of defaults. Creditors have been stuck in limbo since November 2017, when Maduro announced he would suspend debt payments amid an economic crisis, while U.S. sanctions prevented any sort of renegotiation that would pave the way for payments to resume.

Venezuela's Defaulted Bonds Soar as Anti-Maduro Protests Mount

The opposition has rallied behind the call of National Assembly leader Juan Guaido, who has invoked the constitution as he pushed for restoring democratic order after Maduro began a new term widely deemed to be illegitimate due to fraudulent elections.

“The opposition is now united around a new leader with a more radical strategy,” said Siobhan Morden, the head of Latin America fixed-income strategy at Nomura in New York. “It may soon be reaching a breaking point while the cashflow stress continues to worsen and the political crisis morphs into a social crisis.”

Morden says the opposition’s new strategy distinguishes this time from previous protest waves in 2014 and 2017, and could have more chances of succeeding. Venezuelan bonds traded in a range for most of last year as investors mostly sat on the sidelines, but renewed speculation that the Maduro regime could be toppled is enticing some to come back.

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