Morning Commentary: Turkey under pressure; muted reaction in Venezuela, PDVSA bonds to election

By Rebecca Melvin

New York, May 21 – Turkey’s bonds were under pressure again on Monday as the Turkish lira slid another 2% on the day, while the Central & Eastern Europe Middle East & Africa region overall was largely quiet given many European countries on public holiday in observance of the Christian festival of Pentecost, market sources said.

The lira was down at about 4.5920 against the dollar on Monday, having hit a record low of 4.5933 earlier in the session. The currency has lost 17% for the year so far.

“I think investors are disappointed that the central bank has not taken action to hike interest rates yet,” a New York-based analyst of emerging markets debt said regarding Turkey on Monday.

Turkey’s newer 6 1/8% notes due 2028, of which $2 billion priced in mid-April, were quoted at 91.31, which was down 0.13 on the day.

Venezuela and Petroleos de Venezuela SA bonds opened lower by about a point and then recouped some ground and were hovering only about 20 cents to 30 cents lower on the day after the result of Venezuela’s presidential election on Sunday came in as a resounding victory for incumbent president Nicolas Maduro.

While there had been some expectation that opposition Henri Falcon had a chance to win given some recent polling, the result was overwhelmingly in Maduro’s favor, and gives the authoritarian leader, blamed for the country’s grinding economic crises, another six-year term.

“For the past week, the market has gradually lowered its expectations [regarding an upset for Maduro],” a New York-based analyst said.

“It’s not a surprise,” the analyst said of the Maduro victory. “People are still waiting for what the U.S. is going to do, whether it will launch sanctions banning imports from Venezuela, which will have a big impact, or if it will launch sanctions against imports of Venezuela oil first, which will have less of an impact,” the analyst said.

Venezuela’s 2022 bonds were quoted at 29.20 on Monday morning, down 20 cents to 30 cents on Friday.

PDVSA’s 12ľ% bonds due 2022 were down by 50 cents at 26.80.

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