Bloomberg News

Venezuela Currency Market Sold Fewest Bonds in Two Years

November 20, 2012

Venezuela’s central bank- administered currency market traded the lowest volume of bonds in more than two years.

The Sitme, as the market is known, sold $13.3 million of bonds today, the lowest volume since June 2010, when the currency market was created, the central bank said.

A decline in the supply of dollars to the central bank currency market is fueling speculation that Venezuela may need to devalue the bolivar to boost oil revenue and help close a fiscal deficit.

Venezuela’s bonds due in 2027 were the most sold through the Venezuelan central bank’s currency market today. The central bank sold $11 million of the 9.25 percent securities today, according to data compiled by Bloomberg.

“A decision has been made not to increase supply to Sitme for the remainder of 2012,” Russell Dallen, a bond trader at BBO Financial Services Inc. in Miami, wrote in a note to clients yesterday. “They will be maintaining it at low volumes until decisions about a possible devaluation are made in early 2013,” he said.

The central bank is selling fewer dollars on the Sitme system at a rate of 5.3 bolivars per U.S. dollar to limit its losses as the Venezuelan currency is trading above 13 in the unregulated market, said a government official Nov. 14 with direct knowledge of the matter who spoke on condition of anonymity because no final decision has been made.

The person declined to provide additional details other than saying scrapping the Sitme was a possibility.

Increased spending ahead of last month’s election will push Venezuela’s fiscal shortfall to about 7.8 percent of gross domestic product this year, according to Francisco Rodriguez, senior Andean economist at Bank of America Corp.

To contact the reporter on this story: Corina Pons in Caracas at crpons@bloomberg.net

To contact the editor responsible for this story: Charlie Devereux at cdevereux3@bloomberg.net


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