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Venezuelan yields post smallest decline in 4 months
By Guillermo Parra-Bernal
Bloomberg
BOGOTA
Petroleumworld.com 12 27 06
Venezuela's benchmark 91-day local bill yields posted their smallest decline in more than four months at a weekly auction as investors favored stocks and foreign investments over government debt.Investors seek higher returns than they can obtain from government fixed-income securities, where they have placed most of their excess cash over the past year. An oil windfall has made it possible for President Hugo Chavez to more than double government spending since the start of 2004.
The yield on the government's 91-day bolivar-denominated bills fell 3 basis points, or 0.03 percentage point, to 3.94 percent from 3.97 percent on Dec. 19, the central bank said on its Web site. It was the smallest decline since Aug. 1. Yields have fallen 24 straight weeks to their lowest level in more than five years.
``These are irrationally low levels for yields,'' said Xavier Vegas, a trader at ActiValores Sociedad de Corretaje de Valores CA in Caracas. ``Even as we may feel that yields are stabilizing at these levels, you never know. There's so much liquidity out there.''
The yield on the 91-day bill has fallen from 6.2 percent at the end of January, while inflation has quickened to 16 percent last month from 13 percent at the beginning of the year.
Venezuela's Caracas Stock Exchange index has risen 29 percent since the start of November. It advanced for a 10th straight day today, gaining 0.8 percent to 49,182.25, a record.
Dollar Gains
The dollar has gained 11 percent in street trading against the bolivar. The official fixed rate is 2,147.3 bolivars per dollar. The currency fell 0.6 percent in street trading to 3,338 bolivars per dollar at 2 p.m. today in New York.
Companies and individuals turn to the street market for dollars in Venezuela when they can't get approval from the government to buy the dollars needed to fund their purchases of goods and services overseas at the official exchange rate.
The yield on the government's 182-day bill declined to 4 percent from 4.04 percent a week ago, the smallest decline since Oct. 24.
The government sold all 110 billion bolivars ($52 million) worth of securities offered in the auction.
To contact the reporter on this story: Guillermo Parra-Bernal in Bogota at gparra@bloomberg.net
Bloomberg News
December 26, 2006 14:30 EST
Copyright© 2006 Bloomberg. All Rights Reserved.
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