Venezuelan Bond Soar On Higher Probability Of A Capriles Victory

September 27, 2012

For the last two months, Wall Street has been skeptical of a Capriles victory. In fact, at the beginning of the summer, it seemed as if the Wall Street bet, had more to do with a bet on Chavez’ demise than on Capriles pulling off a victory. As recent as two weeks ago, only one major Wall Street firm was suggesting that the probability of a Capriles victory was significant, with all ther saying that Chavez would win.

Thus, the “standard” view was that a Chavez victory would have a small impact on bond prices, because “nobody expects him to lose”, while a Capriles victory would yield huge gains.

I disagreed on all counts. First, I have believed that Capriles’ chances were larger than expected by Wall Street, while on the other hand I know that Venezuelans are so positive that if Chavez won they would sell all their bond holdings, pushing prices down.

But in investments all things are dynamic and this week, there seems to have been a change of heart and all of a sudden bond price shave started to soar. This is mostly due to the new polls and weaker conviction on the part of Datanalisis, a Wall street darling.

For example, below you can see the so called benchmark for Venezuelan bonds, the Global 2027, and how in the last few days it has gone up and up and now is pushing its recent high, after weak oil prices pushed prices lower from Sept. 14th to Sept. 20th. :

since then, all bond prices have risen and the Global 2027 went from 85.5% to 90% in barely five days which is a strong move, to say the least, historically.

What this says is that Wall Street is beginning to buy the probability of a Capriles victory, something that it was not even close to admitting a few weeks ago.

What this means is that foreign investors were somewhat underrepresented in this trade and now want to try to take advantage of what may be a very asymmetric gamble: If Chavez wins, bonds will drop a reasonably small amount, but if Capriles wins they may rise triple the same amount, if not more.

Of course, nothing is sure in this world. Th road to a Capriles victory may be easier than the road to a Capriles Presidency, if Chavismo decides to create trouble or simply to spend all of the reserves before Capriles takes over.

But for now, Wall Street and international investors are putting their money into Venezuela and PDVSA bonds, which is no guarantee of victory, but given that they do have something to lose, their money,  indicates a higher conviction and a much higher probability that Capriles may pull this off on October 7th.

42 Responses to “Venezuelan Bond Soar On Higher Probability Of A Capriles Victory”

  1. HalfEmpty Says:

    The Lord must hate asymmetric gambles, he made so few of them. That said, it’s a chance for PDVSA retirement fund to make up a few recent loses?

  2. Roberto N Says:

    Soaring Bond prices, soaring Lechuga Verde prices, all points to a lack of confidence in the Fat Man in the palace.

    Hay un Camino

  3. Ronaldo Says:

    It would be very interesting to view the Chavez family portfolio and see if they increased or decreased their holding of Venezuelan bonds. Hugo’s statements that he will win the election are just BS.

    If the Chavez family is buying bonds, then they expect Capriles to win. and vice versa.

  4. Ronaldo Says:

    OT- Can Chavez create local power failures on Oct 7th in Caracas and other pro-Capriles areas? Will paper ballots suffice if the voting machines are not functioning?

    I just don’t trust Hugo Chavez.

    Ok, back to Venezuelan bonds

  5. Bruni Says:

    So if Chávez wins, there should be heavy losses, no? I didn’t get that part, Miguel.

    My latest doubt in Capriles’ victory is that he is asking to debate and Chávez, who is a much more articulate speaker than Capriles, does not want to. As a rule of thumb, when a candidate asks to debate, he is not winning….

    I hope I am wrong, but I don’t like that sign.

    • Andres F Says:

      Except he’s been asking to debate him for a long time.

    • Mike Says:

      “…much more articulate speaker than Capriles,…”
      Maybe in a chabacano way, which undoubtedly connects with “el Pueblo”, but he hasn’t been out much and used this skill, while Capriles was everywhere, connecting, by REAL contact (handshakes, hugs and yes, kisses!).
      I dont think we should be pessimistic here and now. HCR clearly has the momentum over the last 3 months or so. And re the debate, Chavez is clearly afraid and uses the “not in my league” excuse. It doesn’t take speaking skills to tear him apart due to his chronic failure on every front.

      • Bruni Says:

        We may not like Chávez discourse, but he speaks well and he is quick in his answers.

        I like HCR a lot for what he is doing, his actions, his proposals and his way of doing politics, but not for the way he talks. He has a problem with the Spanish syntax and he looks hesitant. That’s OK if, as he has been doing, speaks just for 5 minutes…but having to debate like someone like Chávez is another matter.

        I hope you are right, guys. Maybe I am over-analyzing but I still think that those that ask for a debate are not winning.

        Likewise, if you see Chávez agree to a debate, you know he is in trouble.


    • People in Wall Street think that they will not drop, I think they will drop 5%, because Venezuelans will sell. However these bonds are up 20 points this years and they pay 12.75% per year, so the losses will not be “heavy” the winnings will be lower except for those buying now.

    • VJ Says:

      Please read the following article, written by the renown chilean sociologist Fernando Mires: “El discurso de Henrique Capriles Radonsky”

      http://polisfmires.blogspot.com/2012/08/fernando-mires-el-discurso-de-capriles.html

      • CharlesC Says:

        Excellent. Must read everyone!
        I like so many quotes but here’s one:
        “El discurso de Capriles -a diferencias de el de Chávez que es monológico- es dialógico”

    • island canuck Says:

      Bruni, in a controlled environment like a debate with time limits on answers, say 5 minutes, Capriles would tear him apart.

      Chavez only knows how to avoid answers. Have you ever seen him in a news conference? He rambles on & on. If his answer was limited to 5 minutes & he actually had to address the question he would be destroyed especially with so many unanswered questions in the country – Fonden being only one.

      • CharlesC Says:

        Absolutely, Chavez cannot/will not follow rules and allow himself to be
        an equal (except with people he chooses to respect-ex. Mugabe, Quadaffi,et al…)
        Therefore he would lose.

      • Bruni Says:

        Island, my understanding of the situation is of course from an Internet perspective. You have a better perception having followed Chávez and Capriles on TV.

      • island canuck Says:

        Capriles has also improved his speaking ability tremendously over the last months.

        His emotion, which was missing in the early days, is now so strong you can almost touch & feel it. You have to be there to get the sensation. It’s like a rock concert. Especially among women – they go ape shit :-)

        His message is also very strong and aimed at each region that he is in with the common thread of inclusion, jobs and finished projects.

        In contrast Chavez has no ideas – just repetitions of all his hate against the “Imperio”, burgesas and, of course, Capriles who he calls every name of the book including suggesting that he attend a Mission Robinson to be educated. Kinda funny when you know he went to Harvard.

        • syd Says:

          agree, ic, regarding the VAST improvement in Capriles’ ability to connect and transmit the essence of his proposals. Though I think his inclusion of tid-bits relating to every place he’s been to has not changed, and demonstrates smart strategy.

          you’re right. in a controlled environment, as is the debating platform, Chávez would be incapable of answering directly, or even getting to the answer within the allotted time. In this sense, and given the exponential growth that Capriles has experienced as a candidate, he would make mincemeat out of Chávez.

          as for the harvard qualification .. capriles obtained his law degree and specializations in commercial and tax law, in Venezuelan universities. Outside the country, he completed courses in tax related issues, including at Columbia U. And that’s before his political career began to take off. The guy is super smart and super prepared. But best of all, he’s super sincere. No airs and graces. No delusions. No contest with Chávez.

  6. CharlesC Says:

    What the opposition has learned? Or, what has the opposition learned?
    1. Complaining about Chavez and what he and his minions have done/are doing will not get you votes.
    2. Must look within yourselves to find the answers and believe you will get the opportunity to pursue the completion of your beliefs with all of your might.
    3. People (el pueblo) wants everything free or very cheap and they want to feel they are getting value when they receive or purchase something.
    4. The sharpest contrast Capriles offers in my opinion is -to invite el pueblo to work-work together with Capriles and everyone to make a better world
    as opposed to Chavez- foreign companies do all of the work and Chavez feeds,clothes, houses, etc. for everyone-if you believe that is possible?
    Feel free to add to this list.

  7. CharlesC Says:

    Here’s another list to form:
    Things you will NEVER see Capriles do that Chavez did all of the time-
    1. When it comes to “cadenas” their are so many-here’s one.Chavez suddenlystops and and starts talking about something that has nothing to do
    with anything-and then with tears in his eyes-he begins to sing some weird song nobody has ever heard of. I could never understand that- he would get this far off look and his mind would go “there”….

  8. Kepler Says:

    OT: Igor Sechin gave Chávez a wee terrier from Putin – Putin’s puppet, thus – and they signed new agreements for oil.

    The Chinese, I have the impression, are waiting a week or two. They don’t want to waste ink.

    • CharlesC Says:

      Don’t you think it is embarassing for Venezuela?One part of the agreement is a loan to PDVSA to cover part of their responsiblilty in sharing the development of the joint project with the Russians. So, the Russians are paying their share and having to help Venezuela pay theirs, too…
      Same thing happened with Brazil, China, and others….
      Somehow I think this is illegal because in a sense these “foreigners”have more than 50% control?

    • Roy Says:

      Hay que pobre cachorro…

      • Kepler Says:

        Hugo le puso ya un nombre: “el ruso”. He should have called him after himself.

        I have been thinking about this: Castro gave him two cocks…two roosters…and Putin gives him a dog.
        I have the suspicion the Chinese thought for a moment to give him a donkey.
        At the end, the Han were cleverer and decided to give him an agreement: you sign here and we make Venezuela a space superpower like the USA.

    • CharlesC Says:

      “gave Chávez a wee terrier from Putin”the freakin thing is huge and they claim [he] is trained-yeah, to run wild and howl at the moon. Chavez is not the type to own a dog and certainly this dog is not his type and not suitable for Venezuelan climate (too much hair)…
      Furthermore-as with Obama and his dog-hundreds of thousands of dollars have been spent on that uncontrollable monster.How many trainers, etc. I had heard $125,000 first year…freakin waste!!


  9. Hello everyone,

    yesterday I posted a message stating that one should avoid being too one-sided (as in Chavez is all wrong and the other guy all right). I has been censored; it never saw the light of day here in the “responses”.

    Now it is clear the kind of “democracy” you favor: the one in which only your opinion can be expressed.

    You are either very badly intentioned or are simply fooling yourself. Shame on you…

    • marzolian Says:

      But … Chavez is always wrong. Except by accident.

    • CharlesC Says:

      I thought I heard a who?
      “In my world everyone is a pony, and they all eat rainbows, and poop butterflies.” -Katie from Horton Hears a Who

    • Kepler Says:

      Did you try to press a button in your computer that is called “enter” or has a little arrow backwards?
      There have been hard-core Chavistas who have written a zillion comments in this blog. Miguel has only censored twice in many years (since 2003, 2004?) after the guy became pretty vulgar.

      So, I ask you: isn’t it perhaps that you forgot to press ENTER and already came here with your idea that we are in any way similar to Chavismo, the milicos and the Bolipseudosocialists?

      In several posts below you can see a guy called Cort Greene insulting us and saying Chavismo is the best thing after sunlight and water.

    • ErneX Says:

      This is Miguel’s blog and he can do pretty much what he wants with it, this isn’t a right you or anyone are entitled to.

      But staying on topic now, I don’t think he excercises any kind of censorship.

    • Moctavio Says:

      You have not been censored, your mesage never appeared

    • Roy Says:

      Julio,

      May I point out, that even if you had been censored (which you hadn’t, based on other comments in this thread), the Chavista blogs DO blatantly censor opposing comments. See the comment below on Foros de aporrea.org:

      “En estos foros no se acepta propaganda opositora ni golpista, en especial referencias racistas, machistas u homofóbicas. Todo mensaje grosero, racista o de propaganda opositora será borrado, y nos reservamos el derecho de bloquear a los saboteadores, al igual que los medios golpistas tienen vetados a los que apoyamos el proceso de cambios.”

      Now, tell me which side is the one which is intolerant of democratic expression?

  10. moctavio Says:

    Julio: I get an email every time someone makes a comment, but comments go straight to the blog. I have no email earlier than this comment from you, none yesterday. I have erased comments from this blog, more from opposition people than from Chavistas, but mostly for insults to other readers. I do not allow two people to comment because they only came here to harras and I had to warn them many times not to continue their behavior before I started blocking them.

  11. nelson Says:

    Just as a FYI…Where do you get these graphics from?

  12. Moctavio Says:

    This is from bloomberg proffesional


  13. [...] Venezuelan Bond Soar On Higher Probability Of A Capriles Victory [...]


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