Venezuelan Debt To Close In On Oil

While political risks certainly lurk in the background, we still like Venezuelan external debt on a short-term basis, and highlight the potential for gains on the benchmark Global US$ 27 bond in particular. We formed this view in December 2010 on the back of global rising oil prices (see our online service, December 3, 'Near-Term Upside For External Debt'), and since then oil has continued to surge, with front-month WTI trading near its 29-month highs at the time of writing. In addition, the currency was devalued in January and the economy posted its second consecutive quarter of positive year-on-year real GDP growth in Q410, boosting the country's sovereign risk profile and reinforcing our bullish outlook for external debt in the near term.

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