Venezuelan Bonds Fall as Chavez Supporters Win Governor Posts

Venezuelan bonds fell the most in two months after opposition parties relinquished five gubernatorial posts yesterday, triggering speculation they may not have enough support to defeat President Hugo Chavez’s successor should an emergency vote be called.

Yields on Venezuela’s dollar-denominated bonds due 2027 rose 19 basis points, or 0.19 percentage point, to 9.31 percent at 10:35 a.m. in Caracas, according to data compiled by Bloomberg. The price sank 1.5 cent to 99.51 cents on the dollar after surging more than 10 cents in the prior three weeks.

Opposition candidates took just three of 23 gubernatorial posts in the nationwide elections, down from the eight they had controlled. Venezuelan bonds had been rallying in part on speculation that the opposition had enough backing to win an emergency presidential election should cancer force Chavez, a self-declared socialist who has nationalized more than 1,000 companies, to step down from office.

“This seems to suggest that the chances that the opposition could win an eventual presidential election are declining,” Alejandro Arreaza, a Barclays Plc economist, said in a telephone interview from New York.

Miranda Governor Henrique Capriles Radonski, the opposition candidate who Chavez defeated in October presidential elections, won re-election yesterday.

To contact the reporter on this story: 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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