Treasury Today Country Profiles in association with Citi

Markets go Caracas

It’s often considered poor form to profit on the back of another’s misfortune, but the markets have no such scruples. Rumours that Venezuela’s firebrand President, Hugo Chavez, had expired earlier this week prompted a rally in the profile of the country’s sovereign debt causing CDS spreads to tighten by 134 bps.

In fact, Chavez, who flew to Cuba earlier this month to have an operation on a pelvic abscess, is believed to be convalescing in a Havana hospital, from which he continues to govern the country. After falling silent for over a fortnight, the President has taken to his Twitter account to confirm he and the revolution are still very much alive and kicking.

That didn’t stop the bond markets reacting positively to the prospect of his demise, with an uptake in demand for the country’s debt nudging prices up by 6 points. According to RBS that “represents just a fraction of the potential gains on a potential regime change”.