Bloomberg News

Venezuela Bonds Rally as Chavez’s Health Worsens: Caracas Mover

March 05, 2013

Venezuelan bonds rallied, sending yields to a three-week low, after an aide said President Hugo Chavez’s health is deteriorating, fueling speculation that elections for a new government will be called.

The yield on the South American country’s $4 billion of 2027 bonds fell 13 basis points, or 0.13 percentage point, to 8.77 percent at 11:41 a.m. in Caracas, the lowest since Feb. 11. The price increased 1.03 cents to 103.91 cents on the dollar.

Chavez’s health is in a “very delicate” state as he struggles with chemotherapy treatment for cancer and a “severe” respiratory infection, Information Minister Ernesto Villegas said yesterday in a national address. The self-declared socialist has seized more than 1,000 companies or their assets and imposed price caps and currency controls in almost a decade- and-a-half of steering Venezuela’s economy.

“It’s been clear for some time that Chavez is quite ill, and his tenure as president is probably coming to an end,” Marco Santamaria, who helps oversee $24 billion in emerging- market debt at AllianceBernstein Holding LP, said in a telephone interview from New York. “The question we’ve been struggling with is how soon that tenure ends and what the transition looks like. Clarity on the timing of that transition provides some space for bonds to rally.”

Under Venezuela’s constitution, an election must be held within 30 days if Chavez dies or steps down. His hand-picked successor, Vice President Nicolas Maduro, has been running affairs in his absence.

Cancer Surgery

Chavez hasn’t been seen in public since traveling to Cuba for cancer-related surgery Dec. 10 aside from photos released last month. Messages were posted to his Twitter account upon his return to Caracas on Feb. 18. He has undergone four cancer- related surgeries in Havana since June 2011.

Since taking office in 1999, the former paratrooper has turned the state crude-oil producer Petroleos de Venezuela SA into a political tool to promote his policies abroad and fund social programs at home.

Yields on PDVSA’s $6.15 billion of 8.5 percent bonds due 2017 declined 22 basis points to 8.50 percent. The cost of protecting Venezuelan debt against non-payment for five years with credit-default swaps fell 21 basis points to 628 basis points, according to data compiled by Bloomberg.

To contact the reporters on this story: Boris Korby in New York at bkorby1@bloomberg.net; Veronica Navarro Espinosa in New York at vespinosa@bloomberg.net

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


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