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PDVSA bonds rise as Dresdner recommends buying
By Guillermo Parra-Bernal
Bloomberg
CARACAS
Petroleumworld.com 04 12 07
Bonds of Venezuelan state oil company Petroleos de Venezuela SA rose after Dresdner Kleinwort recommended investors buy the securities, citing demand from international banks.In a note to customers today, Dresdner recommends clients trim holdings of Venezuelan government bonds and buy the so- called PDV-bono, which comprise $7.5 billion of 2017, 2027 and 2037 bonds.
``The current Petroleos spread over Venezuela's government curve is driven by supply from local investors,'' Dmitry Sentchoukov and Arnab Das, emerging-market analysts at the bank, wrote in the report. ``We expect this supply to be overpowered by demand from benchmarked international investors driving the spread difference tighter.''
The Petroleos bonds, trading on a when-issued basis, rose the day before regular trading began, indicating demand from banks and institutional investors. The sale is the largest such domestic corporate bond offering in Latin America.
The yield on the Petroleos' 5.25 percent bond due in April 2017 declined for a third day, falling 1 basis point, or 0.01 percentage point, to 7.62 percent, according to composite prices from 11 banks. The bond's price, which moves inversely to the yield, rose 0.06 cent to 83.62.
Investor Benchmark
The analysts forecast that the Petroleos issue, offered solely to Venezuelan local investors this month, will be included in JPMorgan Chase & Co.'s Emerging Market Bond Global Index, a benchmark for bondholders. Its addition to the index may boost demand, particularly from funds that mimic the JPMorgan barometer, according to the report.
The bonds, which were registered under Regulation S in Luxembourg, can only be purchased by U.S. resident investors starting in mid-May. Investors who placed bids for the securities will be allowed to start trading them tomorrow.
The bond yields about 291 basis points above the U.S. Treasury maturing in February 2017. The yield difference was 296 basis points on April 3.
Compared with the Venezuelan government dollar bond maturing in 2018, the same Petroleos bond yield is 85 basis points higher. The yield premium, or spread, was 84 points yesterday. A narrower spread indicates less perceived risk for the bonds.
Currency Unchanged
The currency was unchanged at 3,600 bolivars to the dollar from yesterday at noon New York time in unregulated parallel markets, traders said. Since the bond sale was announced on March 22, the bolivar has gained about 10 percent.
The Petroleos bond sale is part of the government's plan to drain cash from the economy and lower the inflation rate, at 18.5 percent for the 12 months ended in March, the highest in Latin America.
Many Venezuelan investors have limited access to dollars at the official exchange rate under the government's currency restrictions and will likely sell the 10-, 20- and 30-year bonds for dollars, traders said.
``Our customers ask us what to do with those bonds and what is the market perception about them,'' analysts at Caracas-based Solfin Sociedad de Corretaje de Valores said in a report released today. ``The answer is that the bonds can easily be part of a long-term, diversified portfolio.''
Under restrictions that President Hugo Chavez imposed in February 2003, foreign currency trading outside the government channel is prohibited.
Venezuelans often resort to the unregulated market to obtain dollars when they can't get them from the government at the official rate of 2,150 bolivars per dollar. In a bid to curb the use of the parallel dollar market, finance ministry and tax agency officials said in January people who buy and sell dollars outside proscribed channels may be subject to prosecution.
To contact the reporter on this story: Guillermo Parra-Bernal in Caracas at gparra@bloomberg.net
Bloomberg 11 04 07
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