Venezuelan bonds surged the most in two years, sending yields to the lowest level since February 2008, on speculation President Hugo Chavez’s health is too fragile for him to complete his third term.
Chavez, a self-proclaimed socialist who has seized companies and imposed currency and price controls during his 14 years in office, has been in Cuba for a week to help recover from an unspecified form of cancer and hasn’t been seen in public for 21 days. The government hasn’t released images of Chavez since a live appearance on state television Nov. 15.
“In times past, when he’s gone to Cuba for treatment, there’s always been video of him getting on or off the plane or he would make a phone call to Venezuela’s state TV or pose with a picture of the Granma newspaper with Fidel for a sort of proof of life,” Russ Dallen, the head bond trader at Caracas Capital Markets, said today in a telephone interview from Miami. “But we haven’t had any of that for going on 21 days now. We’re getting closer to the end.”
The yield on Venezuela’s benchmark 9.25 percent securities due in 2027 fell 33 basis points, or 0.33 percentage point, to 9.18 percent at 3:12 p.m. in Caracas, according to data compiled by Bloomberg. Yields have plunged 1.74 percentage points since mid-November. The bond’s price rose 2.62 cents today to 100.50 cents on the dollar, the biggest one-day rally since June 2010.
Chavez said Nov. 1 that he planned to attend a Mercosur trade summit in Brasilia. Failure to appear would heighten speculation that the president’s health is worse than he has let on and increase the possibility he won’t complete a third six-year term set to begin in January, said Emilio Garcia, a bond trader at BancTrust & Co. in Caracas.
“We know very little about his true state of health,” Garcia said today in an e-mailed response to questions. “This increases the uncertainty over his future as president.”
Venezuelan Vice President Nicolas Maduro is due to arrive today in Brazil to attend the South American trade bloc summit, Brazil’s Foreign Minister Antonio Patriota told reporters in Brasilia. Press officials in Venezuela’s Information and Foreign ministries declined to comment on whether Chavez would attend the summit.
The government hasn’t said how long Chavez would be away or provide an indication of health except to say he is doing well and will return to Venezuela in time for his Jan. 10 inauguration. Chavez was re-elected in October after telling voters he was “totally free” of cancer. He returned to Havana early Nov. 28 for hyperbaric oxygen therapy.
Chavez told supporters at an October campaign rally that Cuba’s Fidel Castro had sent him a letter to say that he had no doubt that Chavez would win re-election. Granma is the newspaper of Cuba’s Communist Party.
Venezuelan dollar debt has returned 43 percent this year through yesterday, the most in Latin America, according to the JPMorgan Chase & Co. EMBIG Index.