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Venezuelan Bonds Fall as Chavez Opposition Loses Governor Seats

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 24 basis points, or 0.24 percentage point, to 9.36 percent at 4:31 p.m. in Caracas, according to data compiled by Bloomberg. The price sank 1.9 cent to 99.11 cents on the dollar after surging more than 10 cents in the past 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 whom Chavez defeated in October presidential elections by more than 10 percentage points, won re-election yesterday.

The elections were held as Chavez, 58, was recovering in Cuba from cancer surgery, his fourth since June 2011. He began communicating with family and ministers three days ago, Science and Technology Minister Jorge Arreaza, who is also the president’s son-in-law, said on state television yesterday.

Venezuela is the best-performing emerging market in bond trading this month after Argentina and Belize, with a 6.6 percent gain, according to JPMorgan Chase & Co.’s EMBI Global index. For the year, Venezuelan securities have risen 48 percent, trailing only the Ivory Coast.

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