Venezuelan Bonds Climb to Six-Month High on Opposition Victory

  • Opposition claims two-thirds of National Assembly after vote
  • Venezuela GDP set to shrink 10%, has world's fastest inflation

Venezuelan bonds climbed to the highest in six months after the opposition won a so-called super-majority in congressional elections, enough to push for widespread changes.

The opposition won 109 seats in Sunday’s vote, compared with 55 for the ruling party, the National Electoral Council said late Tuesday. Another three seats reserved for members of indigenous communities will vote with the opposition. Controlling two-thirds of the seats allows the opposition widespread powers to oppose the government of President Nicolas Maduro, 16 years after his mentor Hugo Chavez swept to power.

“We are faced with a tectonic shift in Venezuelan politics,” said Jorge Piedrahita, the chief executive officer at Torino Capital LLC in New York. “For the first time in almost a generation, the opposition has full control of congress. ”

Bonds due in 2022 surged 2.5 cents to 53.7 cents on the dollar as of 2:04 p.m. in New York, extending their gain since Friday to 5.8 cents. State-owned oil producer Petroleos de Venezuela’s bonds due the same year gained 2.2 cents to 53.9 cents per dollar.

Venezuelans turned against the government as the country’s economy heads for a 10 percent contraction this year amid soaring prices and widespread shortages of basic goods. Inflation in the South American nation will end this month at 190 percent, the fastest in the world, according to International Monetary Fund estimates. Maduro remains president until 2019, and the Supreme Court and central bank are still packed with his appointees.

Traders in the credit-default swaps market see a 58 percent chance that the country will miss payments in the next 12 months, down from 61 percent on Friday.

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