Venezuela’s Bonds Fall to One-Week Low on Chavez Asset Seizures

By Lester Pimentel

May 11 (Bloomberg) -- Venezuela’s benchmark bonds fell to a one-week low on concern President Hugo Chavez’s seizure of assets at 60 oilfield service companies will prompt foreign investors to shun Latin America’s biggest crude exporter.

The yield on Venezuela’s 9.25 percent bonds maturing in 2027 climbed 20 basis points, or 0.2 percentage point, to 14.77 percent at 10:27 a.m. in New York, according to JPMorgan Chase & Co. The bond’s price dropped 0.90 cent on the dollar to 65.35 cents.

Chavez has taken over assets from companies including Oklahoma-based Williams Cos., using a law the national assembly passed last week. Petroleos de Venezuela SA, the state oil company, is pressing foreign service companies to lower rates as growing debts hamper oil output. The government depends on revenue from oil sales to finance half its budget. Oil has tumbled 61 percent since July.

“This is quite concerning,” said Paul Biszko, an emerging-markets strategist with RBC Capital Markets in Toronto. “It confirms the government is turning to more desperate measures. The government is scrambling to fund gaps caused by the collapse of oil.”

The extra yield investors demand to own Venezuela bonds instead of U.S. Treasuries swelled 37 basis points, the most among the countries tracked in JPMorgan’s EMBI+ index, to 12.17 percentage points.

For Related News and Information: Venezuela economic snapshot: ESNP VZ <GO> Venezuela government bonds: VENZ <CORP> DES <GO> Venezuelan economy: TNI VENZ ECO BN <GO>