EM Alpha: Venezuela: Close two relative value trades

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EM Alpha: Venezuela: Close two relative value trades

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EM Alpha

Venezuela: Close two relative value trades

Close trade favoring high-coupon vs low-coupon bonds 29 June 2026

We close our Buy VENZ ‘22s vs. VENZ ‘28s trade recommendation. We entered the trade GEM FI & FX Strategy

at a $4.4 price difference on 12 February and exit at $6.9 (see Venezuela relative value Emerging Markets Global

guide: In search of optionality). The trade was based on the view that high-coupon bonds Lucas Martin, CFA

with high-PDI (past due interest) offered optionality because markets priced in a large Sovereign Debt FI Strategist

discount for PDI claims relative to principal claims. Since then, the market has priced in a BofASlucas.martin@bofa.com

better treatment for PDI claims. In addition, the possibility of an earlier conclusion to the Jane Brauer

debt restructuring could reduce the amount of additional prospective PDI accrual. Sovereign Debt FI Strategist

BofAS

Close VENZ ‘19s vs. VENZ ‘25s after reaching target jane.brauer@bofa.com Sebastian Rondeau

We also close our Buy VENZ ‘19s vs. Sell VENZ ‘25s trade recommendation after the Southern Cone & Venz Economist

trade reached our target. We entered the trade at -$1.6 and exit at -$0.5 (see Venezuela BofASsebastian.rondeau@bofa.com

relative value guide: In search of optionality). The rationale was that short-end Republic David Hauner, CFA >>

bonds traded at a discount potentially due to statute-of-limitations risks, but we viewed Global EM FI/FX Strategist

the risk of bondholders losing their principal claim in a debt negotiation as remote. MLIdavid.hauner@bofa.com(UK)

GEMs FI Strategy & Economics

Exhibit 1: We close two of our relative value trades in Venezuela See Team Page for List of Analysts