Bloomberg News

PDVSA Bond Rally Sends Yield on 2015 Note to Record Low

April 27, 2012

The yield on Petroleos de Venezuela SA bonds due in 2015 fell to the lowest since being issued in 2009 amid a rally in Venezuelan assets.

The yield on the 5 percent bonds due in 2015 fell 53 basis points, or 0.53 percentage point, to 10.27 percent at 1:22 p.m. in Caracas, according to data compiled by Bloomberg. The bond’s price rose 1.38 cents to 84.86 cents on the dollar.

The bonds are attractive because there’s little risk additional supply will create a glut, Raymond Zucaro, who helps manage about $230 million of emerging-market corporate debt at SW Asset Management LLC, said in a phone interview.

“I feel comfortable being on the short end because any new issuance will come from longer maturities,” Zucaro said. “PDVSA is a big company with a lot of cash flow and reserves.”

Bonds from PDVSA, as the Caracas-based company is known, have been the fourth-most traded corporate note this week, behind debt from General Electric Co., Bank of America Corp. and Goldman Sachs Group Inc., according to data measuring trades of at least $1 million from Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The state-owned company said April 17 that profit rose 42 percent and revenue surged to $124.8 billion last year.

Investors may be buying PDVSA bonds with shorter maturities on speculation that the company will issue new longer-term securities after publishing its 2011 financial report, Edgar Jaimes, a director at financial analysis firm Arca Financial CA, said in a phone interview.

Anticipated Issuance

“People prefer shorter maturities right now since the market is anticipating a bond sale in the second half of May,” Jaimes said. “We’ve also seen demand for notes due in 2017 and 2022 as the supply of those bonds being sold by the central bank dries up.”

Venezuelan assets have rallied this year as investors speculate that President Hugo Chavez’s battle with cancer may accelerate a change of government and reverse policies that have fueled inflation and driven away foreign investment, Zucaro said. PDVSA’s 2015 bond has returned 20 percent this year.

Chavez has spent more time in Cuba than Venezuela since a relapse of his cancer in February, traveling to the island to receive radiation therapy. He says that he intends to seek re- election in an October vote.

To contact the reporters on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net; Corina Pons in Caracas at crpons@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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