Venezuela Default Odds at 94% as Bonds Sink to Lowest Since ’98

[FLPanhandle]

Source: Bloomberg

Swaps traders are almost certain that Venezuela will default and bond prices are at a 16-year low as the rout in oil prices pressures government finances.

This year’s 42 percent plunge in oil prices has exacerbated concerns that Venezuela is running out of dollars needed to pay debt, pushing bond prices to levels investors haven’t seen since the 1998 Russian financial crisis spurred a selloff in emerging markets. At $21.5 billion, the nation’s reserves are at their lowest levels in a decade and cover only about 40 percent of total debt due over the next five years.

“It’s very hard to think of a new marginal buyer for Venezuelan debt,” Mohammed Grimeh, head of financial markets at Standard Chartered Plc, said by phone from New York. “The hedge funds aren’t buying it and the dealers aren’t taking risk.”


Venezuela’s Finance Ministry didn’t respond to a phone call or e-mail seeking comment. Foreign Minister Rafael Ramirez said yesterday that the nation is working to raise the price of oil to $100 per barrel.


Read more: http://www.bloomberg.com/news/2014-12-11/venezuela-default-odds-at-94-as-bonds-sink-to-lowest-since-98.html

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Not sure how Venezuela will avoid defaulting. They have already promised so much future oil to the Chinese in exchange for loans that even if prices rise, they'll be stuck pumping oil for nothing.

[DeSwiss]

1. Capitalist stupidity objectified.

- No more inches for you, Venezula!

K&R

[Adrahil]

2. That's not quite accurate. Currency is a means of exchange...

While inches are a direct measurement of a two dimensional property. A commodity (or resource) is not "worth" a fixed sum. A resource or item is worth exactly what someone is willing to pay for it. As a means of exchange, money is just a way of facilitating the conjunction of supply and demand. That's it. But of course, since the monetary supply is regulated, money itself is often thought of as the resource.

That's actually a huge mistake the Venezuelans are making. They think can dictate set value in their currency. But that ignores the fundamentals of supply and demand, and since the Bolivar is not the only game in town (and incredibly poorly managed), it's not the REAL medium of exchange... Dollars are.

Venezuela has a criminally mismanaged economy. It would be comical if it wasn't so tragic for millions suckered in by the Chavistas. I honestly believe they began with their hearts in the right place, but they have no idea how to actually run Ana economy.

And no, it's not about the mean ole U.S. The U.S. Has been trying to screw over Cuba for decades, and despite some effect, the Castro regime is not quite as idiotic as the Chavistas and Cuba is stable, if poor.

[hack89]

3. Venezuela certainly does not do capitalism well

which really sucks when you depend on the global markets for most of your revenue.

[snooper2]

4. Looks like the socialist dream is almost to coming true!

Remember you have to tear it all apart before you can start down the right path!

[joshcryer]

6. Yep, Marxist historical materialism.

The entire system must burn before it can be rebuilt in its ashes.

Of course, that has never, ever, in history, ever happened.

But that's what the idea is.

[snooper2]

5. KICK!

three of my DU friends haven't commented on this yet

[quadrature]

7. whats the downside to all this?

everybody wins!

what to buy $1000 face value, in Venezuelan bonds.
just take a nickel out of your pocket!