Venezuela Bonds Plunge

US dollar-denominated bonds in Venezuela took a dive after the Venezuelan government declared a new FOREX platform which seemed inadequate to put an end to current economic issues.

The Organization of Petroleum Exporting Countries has opted for the SIMADI. It is a free-floating foreign exchange tool with tri-layer exchange regulatory system designed to augment state funds.

Venezuela is confronted with likely funding gaps this year and indebted to foreign investors holding US dollar accountabilities.

An emerging market debt analyst sees the urgent need for this Latin American nation to plug a $14 billion cavity in its financial books to settle obligations. There is even the probability that it go up to more or less $26 billion next year.

According to government critics, modifications in government’s currency control program of more than a decade failed to take away two immensely over-valued currency exchange rates. This restricts the government's capability to set aside hard currency in the midst of the decline of crude oil earnings.

Government debt plummeted since the new program failed to impress markets. The Global 2027 Venezuelan bond decreased 3.49 points to bid at 40.005 and pushed yields to 25.12 percent.

Bonds of the state-owned oil firm also fell and benchmark 2024 bond diminished 1.36 points in to bid at 32.64 with an almost 25 percent profit.

The crash of oil prices left the country's state-led model built by the late President Hugo Chavez coping with recession.

Venezuela's bonds are now trading at distraught levels with yields paying 27 percentage points more than US Treasury bills because of fears of potential default.

Nonetheless, the government maintains it can settle all international debt commitments without reducing social expenditure plans or abandoning its FOREX control platform.