March 12 (Bloomberg) -- Venezuela’s benchmark dollar bonds rose to a seven-week high on speculation a rally in crude oil, the country’s biggest export, will prompt the government to pare back debt sales this year.
The yield on Venezuela’s 9.25 percent bonds maturing in 2027 fell 10 basis points, or 0.1 percentage point, to 12.23 percent at 4:45 p.m. in New York, according to JPMorgan Chase & Co. The bond’s price rose 0.60 cent to 78.70 cents on the dollar, the highest level since Jan. 20.
Venezuela’s bonds had the biggest weekly gain since Jan. 8 as oil, which finances more than 50 percent of government spending and accounts for 93 percent of export revenue, climbed above $83 a barrel. Rising oil prices may lead the government to limit debt sales in 2010, said Russell Dallen, head trader at Caracas Capital Markets at BBO Financial Inc. in Miami.
“It’s been a very strong week for Venezuelan bonds,” Dallen said. “The fact that oil is trading at over $80 a barrel and has stayed there is definitely helping.”
Alberto Cardenas, strategy manager at BancTrust & Co. in Caracas, forecasts Venezuelan bonds may rise as high as 90 cents on the dollar in June before congressional elections in September.
Venezuela will refrain from selling international bonds aimed at bringing down the parallel exchange rate this year, Diego Sasson, an emerging-markets analyst at Credit Suisse Group AG, said in a report. Venezuelan companies and individuals turn to the so-called parallel currency market when they can’t get government approval to buy dollars at the official rates of 2.6 and 4.3 bolivars per dollar.
The bolivar fell 0.9 percent in the unregulated market to 6.91 per dollar, the lowest since March 3, traders said.
Venezuela and state oil company Petroleos de Venezuela SA sold $11.3 billion of bonds last year in part to provide dollars to investors in the local market. The central bank has issued $310 million of dollar bonds payable in bolivars in the local market this year, part of an effort to hold down inflation after President Hugo Chavez devalued the official exchange rate by as much as 50 percent on Jan. 8 as he struggled with dollar outflows and a growing budget deficit.
“Measures to contain the bolivar in the parallel foreign exchange market will not include the issuance of public-sector external debt in the remainder of 2010,” Sasson wrote. “We expect the central bank to intervene in the parallel foreign exchange market more aggressively in coming months and also to increase the sales of dollars at the official exchange rates. This should preclude the government and/or PDVSA from tapping markets.”