Venezuela Bonds Slide on Speculation Sale Will Top $4 Billion

Venezuelan bonds fell on speculation the government will sell more than $4 billion of bonds to finance government programs, swelling the supply of debt in international markets.

The yield on Venezuela’s benchmark 9.25 percent dollar bonds due in 2027 rose 13 basis points to 13.03 percent at 5 p.m. in New York, after earlier rising as much as 19 basis points, according to data compiled by Bloomberg. The price on the bonds fell 0.70 cent on the dollar to 74.75 cents.

Speculation is mounting that the offering will total about $4.2 billion, more than some investors expected after a government official said July 18 that Venezuela would sell at least $3 billion of dollar-denominated debt this year, said Russell Dallen, a bond trader at BBO Financial Services Inc. in Miami. The official, who’s not authorized to speak publicly on the matter, said the sale may be as soon as August.

“There’s a widespread rumor on Wall Street that over $4.2 billion of a new Venezuela bond with a 12 percent coupon due in 2031 is coming,” Dallen said in an e-mail.

A Finance Ministry press official declined to comment on the sale today.

Venezuela may sell $4 billion of 12 percent bonds due in 2031, Siobhan Morden, head of Latin American strategy at RBS Securities Inc., said today in a research note.

“We cannot disregard a step up in issuance to fund the still obvious shortages of both consumer and other goods that create systemic shortages, bottlenecks, supply side inflation and lower growth,” Morden wrote in the report.

Venezuela sells dollar-denominated bonds to local investors, who pay for the securities with bolivars, in part to relieve pent-up demand for foreign currency. Investors can sell the bonds in international markets for dollars, allowing them to circumvent President Hugo Chavez’s currency controls. State oil- company Petroleos de Venezuela SA has already issued about $8 billion of new debt this year.

The government last sold dollar bonds in August when it issued $3 billion of securities due in 2022 with a 12.75 percent coupon.

To contact the reporter on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net

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

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