Venezuelan borrowing costs plummet as investors eye ‘gold rush’

Core Viewpoint - The cost of Venezuelan government borrowing has significantly decreased following the ousting of President Nicolás Maduro, with the yield on 10-year bonds dropping to its lowest level since March 2019, indicating a potential shift in the country's debt situation and investor sentiment [1][2]. Group 1: Market Reactions - The yield on benchmark 10-year bonds fell by 5.82 percentage points to 28.64%, the lowest since March 2019 [1]. - Investors are optimistic about the restructuring of Venezuela's $60 billion sovereign debt, with one hedge fund describing the situation as a "gold rush" [2]. - Bond prices have rallied since the return of Trump to the White House, reflecting hopes for regime change in Venezuela [3]. Group 2: Investor Sentiment - Portfolio manager Nicolas Jaquier noted that Maduro's removal without major military escalation is viewed positively by market participants [4]. - Analysts believe that the bond restructuring process can begin following Maduro's removal, with expectations of the US administration pushing for terms favorable to reopening the oil sector [5]. - Martin Bercetche from hedge fund Frontier Road highlighted an "asymmetric upside" to Venezuelan sovereign bonds, indicating potential profits outweigh risks [7]. Group 3: Financial Implications - Venezuela's debt crisis began in 2017 when it missed payments on international bonds, leading to significant financial challenges [6][7]. - The total estimated obligations, including those from PDVSA and court rulings, range from $150 billion to $170 billion, indicating a substantial debt burden [5]. - Hedge funds are seeing returns from Venezuelan debt, with one firm reporting a 31% return last year, driven by expectations of increased oil production capabilities [8].