Venezuela’s sovereign, PDVSA bonds drop after contested election result By Reuters

By Rodrigo Campos and Marc Jones

NEW YORK/LONDON (Reuters) – Venezuela’s bonds and those of state oil firm PDVSA fell deeper into distressed territory on Monday, after both President Nicolas Maduro and opposition rival Edmundo Gonzalez claimed election victory.

Most Venezuelan bonds were down at least one cent in price, with the 2019 and 2038 maturities down 1.75 cents each, according to LSEG data. The PDVSA 2022 was bid at 14.6 cents on the dollar, down more than two cents on the day.

Venezuela’s national electoral authority said early on Monday that Maduro had won a third term in power with 51% of the vote despite exit polls pointing to an opposition win. The United States said it had “serious concerns” about the result, which was also called into question by regional democracies.

The developments took few by surprise, however, given Maduro’s 2018 reelection was also considered fraudulent by the United States, among others.

“So far everything is in line with expectations,” said KNG Securities analyst Bruno Gennari. “Maduro has announced that he has won (the election) and the opposition has challenged it… This scenario, for me, was 99% expected”.

Bond prices had risen in anticipation of the vote, with polls having showed a comfortable lead by the opposition. A regime change is seen by many analysts as necessary for the removal of U.S. sanctions that currently make a debt restructuring all but impossible.

“With Maduro set to remain in office, prospects for the sort of transformative change that would have likely followed an opposition victory would appear to have vanished; at least for now,” said Stuart Culverhouse, chief economist and global head of fixed income research at Tellimer in London.

“To the extent that prices had discounted some prospect of regime change that would be positive for the bonds, we expect there could be downward pressure on prices in the near term as some investors lose patience and in particular tourist investors look to exit.”