Buyers step in to Venezuela; Asia deals continue to flow; Europe, Middle East ‘super quiet’

By Rebecca Melvin

New York, Aug. 25 – Some buyers stepped in to lift Venezuela bonds on Friday in relief that new U.S. restrictions on the country spare U.S.-based trading of Venezuela bonds and instead take aim at the regime led by President Nicolas Maduro.

“Flows were more buyers than sellers,” a trader said, adding that there was another piece of news affecting the market that China was ready to step in with a new fund aimed at repurchasing debt. China has been a big financier of Venezuela in the last 10 years and there were rumors that China was negotiating with Venezuela to help the country make its near term payments.

Meanwhile worries remained about whether J.P. Morgan will remove Venezuelan debt from its emerging market bond index.

PDVSA’s 8½% notes due in November traded Friday at the high end of Thursday’s market of 92½ bid, 94½ offered. These bonds were 90½ bid, 91½ offered a week ago.

The response to new U.S. financial sanctions – which prohibit trade on new debt and implement other measures like banning PDVSA from sending profits from its U.S.-based refining company back to Venezuela – was muted by low volumes since many market players are on summer vacation.

The Trump administration has said it aims to return Venezuela to democracy and punish what it sees as human rights abuses and corruption by the current government.

“Maduro may no longer take advantage of the American financial system to facilitate the wholesale looting of the Venezuelan economy at the expense of the Venezuelan people,” U.S. Treasury Secretary Steven Mnunchin said on Friday.

Elsewhere, new deals continued to flow in Asia in both hard and local currencies early Friday, but emerging markets elsewhere were mostly quiet, sources said.

Franshion Brilliant Ltd. priced a $200 million add-on to its existing $300 million of 4% perpetual notes. In local currencies, Thailand’s WHA Corp. PCL issued 100 million baht of 3.15% three-year debentures at par; Singapore’s Keppel Telecommunications & Transportation Ltd. priced S$100 million of seven-year fixed-rate notes at par with an initial coupon of 2.85%; China’s Guolian Securities Co., Ltd. issued RMB 1 billion of 5% three-year bonds on Thursday; and Panda Green Energy Group Ltd. issued RMB 500 million of additional 6.72% corporate bonds due 2020.

In the Central & Eastern Europe, Middle East and Africa region, there were no deals announced, and trading was “super quiet overall,” a trader said.

Investors were disappointed with speeches by European Central Bank President Mario Draghi and Federal Reserve Chairwoman Janet Yellen on Friday that were devoid of clues on future monetary policy for the two central banks.

The top central bankers were speaking at the annual Jackson Hole conference in Wyoming, where policy news has come to light in previous years. This year, however, Draghi gave no clues on the ECB’s plans for unwinding its bond-buying program and whether the ECB will respond to the strong euro, which is up 13% against the dollar so far this year.

Likewise, in a speech earlier in the day, Yellen did not discuss potential U.S. interest-rate increases such as one that had been tentatively expected for December.

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