Secondary lackluster; Venezuela, PDVSA trade sideways as investors eye potential sanctions

By Rebecca Melvin

New York, Aug. 22 – Trading in emerging market debt was lackluster on Tuesday, leaving spreads mostly narrowly mixed amid low volumes as Treasuries slipped back after several days of strength.

In the absence of new paper and low volumes, many regions were trading sideways this week as summer doldrums continued.

Even Venezuela and PDVSA debt, often separated into a world unto itself, was trading in line and “behaving itself,” a Connecticut-based trader said.

“People are staying put, and prices are behaving and staying in a range,” the trader said of Venezuela.

An outperformer in the curve is Venezuela’s 13 5/8% note due 2018, which was up to around 75 on Tuesday, having traded up from a low of 56 on Aug. 2.

“It has had a beautiful run, and is the only [Venezuela or PDVSA] bond trading above their July 7 levels,” the trader said.

Investors are focused on whether additional U.S. sanctions will be imposed on individuals associated with the regime of President Nicolas Maduro or if sanctions will be ramped up to include bans on imports of Venezuelan oil or exports to that country of U.S. refined products.

On Tuesday, PDVSA’s 2017 bonds, which mature in November, were quoted at 90 bid, 91 offered.

The PDVSA 2022 notes were at 45˝ bid, 46˝ offered; the PDVSA 2035 notes were 36˝ bid, 37˝ offered; and the Venezuela 2022 notes were 44˝ bid, 45˝ offered, a trader said.

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