April 17, 2007
Petroleos de Venezuela SA's bonds rose, buoyed by growing demand from international investors. The bonds also gained as traders were surprised by how many local investors held on to the securities after the $7.5 billion sale was completed last week.
The yield on PDVSA's 5.25 percent bond due in April 2017 declined 7 basis points, or 0.07 percentage point, to 7.61 percent, according to Deutsche Bank AG. The bond's price, which moves inversely to the yield, rose 0.4 cent to 83.7.
"The impression we have is that there is not so many people selling the Petroleos securities for dollars, at least as many as we initially expected,'' said Tulio Bracho, a trader at Financorp Valores Casa de Bolsa CA in Caracas. ``The sell-off that some predicted has not so far taken place.''
A government decision to exempt trading on the bonds from income taxes and recommendations by Dresdner Kleinwort Group and other banks to buy the securities boosted demand for them, said Cesar Aristimuno, president of banking research firm Aristimuno Herrera & Asociados.
Traders expected many Venezuelan investors who have limited access to dollars at the government-set official exchange rate currency restrictions to sell the 10-, 20- and 30-year bonds for dollars. The pace of sales by local investors slowed today from April 13, the first day the bonds traded, Caracas-based brokerage Solfin Sociedad de Corretaje de Valores said in a report today.
PDVSA, Venezuela's state-run oil company, sold the bonds in the local market to investors who paid with bolivars. Petroleos also registered the bonds under Regulation S in Luxembourg, meaning U.S. resident investors can start purchasing them in mid-May.
The PDVSA 2017 bonds yield 70 basis points above the Venezuelan government dollar bonds maturing in 2018. The yield premium, or spread, was 75 points on April 13.
Venezuela's currency gained 0.6 percent to 3,500 bolivars to the dollar, the strongest since Jan. 5, at 4 p.m. New York time in unregulated trading. Since Venezuela announced the bond sale on March 22, the bolivar has gained about 11 percent.
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.