The bond market has entered a financial twilight zone, and at this point, there doesn't seem to be a smooth way out.Market Insiderread more
"I think (rate cuts) will help, but whether they're going to be sufficient to counter the negative trade pressures and global growth slowdown and impact is debatable," one...Central Banksread more
China has used both monetary and fiscal measures to lift economic activity as its trade war with the U.S. looks set to intensify in the coming months.China Economyread more
Alibaba held a board meeting before its latest quarterly earnings release last week, during which the board decided to postpone the Hong Kong listing, Reuters reported.Technologyread more
President Donald Trump said on Twitter he was postponing a scheduled meeting with Denmark's prime minister because of her lack of interest in discussing a possible sale of...World Politicsread more
The two countries want to smash the civil aerospace duopoly enjoyed by Airbus and Boeing.Aerospace & Defenseread more
Federal Reserve Chairman Jerome Powell is set to deliver his annual speech on Friday at the Jackson Hole, Wyoming symposium, where he's expected to provide more clarity on the...Asia Marketsread more
After Elon Musk touts Tesla solar on Twitter, Walmart sues the electric vehicle and clean energy company over store rooftop panels that ignited.Technologyread more
U.S. and Asian investors poured $3.7 billion into U.K. tech start-ups in the first seven months of 2019, research shows.Technologyread more
Trump said he has "been thinking about payroll taxes for a long time" — and he cautioned that "whether or not we do something now, it's not being done because of recession."Politicsread more
Secretary of State Mike Pompeo privately told business executives and free traders that the trade war could end by the 2020 election and that hurdles to an immediate agreement...2020 Electionsread more
One week before Venezuela faces a critical debt payment, the distressed petrostate is already late on a series of smaller bills — and no one can say exactly why.
The nation's state-owned oil giant, Petroleos de Venezuela, SA, has two major bond payments totaling about $2 billion coming due in the next two weeks. While the market expects the company, better known as PDVSA, to avoid default, the missed payments have rattled investors and raised fresh questions about how long embattled President Nicolas Maduro's regime might last.
"You're cutting close to the edge of not enough money in the checking account to pay the bills," said Ray Zucaro, chief investment officer at RVX Asset Management, an asset manager specializing in emerging and frontier markets.
Last week, Venezuela missed five coupon payments totaling nearly $350 million tied to the debt of PDVSA, the government and the utility Electricidad de Caracas. That stoked a minor sell-off in a number of outstanding bonds.
As for the upcoming payments, the first is due next Friday. The price of that bond dipped from a one-year high of $86.80 last week to $83.48 on Monday. It has rallied from a 12-month low of $62.50 on Aug. 1.
PDVSA needs to pay $841 million in principal, plus interest, on that bond. It's a critical moment for Venezuela because a default is seen as hastening Maduro's demise. Making matters worse, the collateral against the bond is Citgo, PDVSA's Houston-based refining and retail subsidiary.
The following week, on Nov. 2, a nearly $1.2 billion PDVSA bond is maturing. Total outstanding obligations for 2017 are about $3.4 billion, and there's no grace period for the two biggest payments.
As Venezuela's economic and political crisis worsens, foreign reserves have dwindled to just $9.9 billion. But analysts and money managers say more than half of that could be in gold and illiquid assets.
The market currently puts the odds of a Venezuelan default at 15 percent, according to an analysis by RVX Asset Management, but Zucaro said he believes the chances are closer to 40 percent. The environment is deteriorating, he said, as Venezuela's latest election results are being questioned and as sanctions on the country expand to include measures that prevent it from raising new funds.
Given the severe cash crunch, it's possible that Venezuela skipped out on the five coupon payments, which have a 30-day grace period, in order to allocate those funds to the payment due on the Oct. 27 bond, Zucaro said.
Edward Glossop, an emerging markets economist at Capital Economics, said that's possible. Since Venezuela is essentially locked out of capital markets, the impact of missing the payments on its ability to borrow is negligible, he said.
But Glossop believes another explanation is more likely: that U.S. sanctions have created technical problems that have forced Venezuela to make alternative arrangements to pay its debt, delaying payments. Some U.S. institutions could be refusing to deal with the government for fear of sanctions, he said. However, he doesn't doubt Maduro's willingness or ability to pay, given that making debt payments has been a priority.
Capital Economics projects that Venezuela is unlikely to default until 2019, though Glossop says it faces another round of hefty payments in 2018.
"Next year is quite tough again. It will be sort of touch and go," he said. "If oil prices remain where they are, we think they could get through."
Helima Croft, global head of commodity strategy at RBC Capital Markets, believes Maduro will continue to rely on Russia to bail out the regime. Russia's biggest oil company, Rosneft, has given PDVSA financial support.
"While it makes sense that they will preserve as much cash to avoid default, they will not be able to do it without Russia. So the question will be how much acreage will this cost them?" she said in an email. "Rosneft is acquiring Venezuelan assets at fire sale prices."