Treasuries climbed, with two-year note yields dropping the most in more than a year, as signs of economic weakness in Germany fueled speculation that slowing global growth will delay Federal Reserve interest-rate increases.
Thirty-year bond yields dropped below 3 percent for the first time since May 2013 as reports showed U.K. inflation dropped to a five-year low in September and German investor confidence eroded. A gauge of inflation expectations measured by the difference between yields on 10-year notes and similar-maturity inflation-index debt traded close to the lowest in more than a year. Volatility reached the highest level since January.
“There is some fear that something else will weaken in terms of economic growth around the world,” said Aaron Kohli, an interest-rate strategist BNP Paribas SA in New York, one of 22 primary dealers that trade with the Fed. “When the Fed attempts to remove liquidity from the system, you start to see the cracks appear.”
The two-year note yield dropped five basis points, or 0.05 percentage point, to 0.38 percent at 3:02 p.m. New York time, according to Bloomberg Bond Trader prices. The 0.5 percent securities maturing in September 2016 added 3/32, or 94 cents per $1,000 face amount, to 100 7/32. The yield fell as much as six basis points, the largest decline since September 2013.
Market Prices
The 30-year (USGG30YR) bond fell five basis points to 2.96 percent and touched 2.94 percent, the lowest since May 3, 2013. The benchmark 10-year yield dropped seven basis points to 2.21 percent. It earlier reached 2.19 percent, a level not seen since June 2013.
Jeffrey Gundlach, chief executive officer of money management firm DoubleLine Capital LP in Los Angeles, which oversees $56 billion, said in an interview on CNBC that 10-year yields will reach a bottom at 2.20 percent. The difference between yields on 10-year notes and similar-maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt, reached 1.92 percentage points, almost the lowest since June 2013.
The Bank of America Merrill Lynch MOVE index, a gauge of Treasuries volatility, rose to 68.69 on Oct. 10, the highest level since Jan. 9. Traders see a 45 percent chance the Fed will raise its benchmark rate by its September 2015 meeting, fed funds futures data compiled by Bloomberg show. That’s down from a 74 percent chance as of Oct. 1. The target rate has been maintained in a range of zero to 0.25 percent since 2008 to support the economy.
Fed Policy
“Markets are realizing the Fed is pivoting,” said Guy Haselmann, an interest-rate strategist at Bank of Nova Scotia in New York, one of 22 primary dealers that trade with the U.S. central bank. We’re moving “toward an environment of lower global growth and inflation. Rates will stay low for a long period of time.”
While the Fed is set to end its bond-purchase stimulus program this month, the prospect of monetary tightening has been tempered by concern that output is sagging from Europe to China. Germany will probably grow by 1.2 percent this year and by 1.3 percent in 2015, marking respective drops from 1.8 percent and 2.0 percent forecast in April, the Economy Ministry said today in its biannual review.
The ZEW Center for European Economic Research’s index of investor and analyst expectations slid to the weakest level in almost two years in Europe’s biggest economy. U.K. consumer-price growth slowed to 1.2 percent in the 12 months through September, the lowest since September 2009 and below the Bank of England’s 2 percent target for a ninth month.
Fed Vice Chairman Stanley Fischer underscored concern the global economy is slowing, fueling speculation the central bank will push back the timing for raising interest rates.
Fischer View
“If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise,” Fischer said in an Oct. 11 speech at the International Monetary Fund’s annual meetings in Washington. Minutes of the Fed’s September gathering released Oct. 8 showed officials highlighted concern that deteriorating growth abroad and a stronger dollar may hurt the domestic economy by curbing exports and damping inflation.
“All eyes are on Europe,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “The negative sentiment is hurting, and you can look at how the market’s changed since the minutes.” Analysts surveyed by Bloomberg last week cut their 10-year yield forecast for the end of 2014 to 2.71 percent, the lowest in data going back to July 2013.
Repo Traders Face FSB Collateral Rule in Shadow Bank Push
Traders are facing new global rules on how they determine the value of collateral in repo transactions as regulators seek to prevent panic writedowns that are seen fueling future financial crises.
The Financial Stability Board, a global group that brings together central bankers and government officials from the Group of 20 nations, today published a set of guidelines on discounts applied to collateral handed over as part of repurchase-agreement trades and other securities-financing transactions that aren’t processed through clearing houses. It also set minimum standards for some types of trades.
Global regulators are targeting so-called shadow banks with tougher rules to prevent a repeat of the turmoil that followed the 2008 collapse of Lehman Brothers Holdings Inc., which was driven in part by difficulties determining the value of securities. The European repo market is worth 5.8 trillion euros ($7.4 trillion), according to latest available data from the International Capital Market Association. The rules, set to take effect by the end of 2017, are “a big step forward in the FSB’s overall work program to transform shadow banking into resilient market-based financing conducted on a sound basis,” Bank of England Governor Mark Carney, who chairs FSB meetings, said in a statement.
‘Stress Period’
Repos are a major source of short-term finance for banks, allowing them to use securities as collateral for short-term loans from investors such as other banks or money-market mutual funds. They are also used by the shadow-banking system, or non-bank financial intermediaries, seeking funding. Collateral serves as protection for a lender against a borrower’s default.
The FSB standards set out what it called qualitative criteria that should be used by traders when calculating the discount that should be applied to collateral. “Haircuts should be set to cover, at a high level of confidence, the maximum expected decline in the market price of the collateral asset,” the FSB said. This “should be calculated using a long-time series of price data that covers at least one stress period.”
“In anticipation of tighter regulation in this area, many institutions have already substantially reduced their repo business and this has been leading to a shortage of liquidity for what might be considered legitimate lending business,” Richard Reid, a research fellow for finance and regulation at the University of Dundee in Scotland, said in an e-mail.
‘Really Struggling’
“This highlights the current dilemma for many regulators and central bankers at present -- how to tighten up regulation in this business without putting yet more strain on the financial system’s ability to support growth at a time when many economies are really struggling,” Reid said.
In some cases, traders should adhere to a numerical “floor” set out by the FSB to ensure writedowns are large enough, the group said. This would apply when financing is provided to a firm that isn’t a bank or broker-dealer, with the collateral being any security other than sovereign debt.
For corporate debt, the minimum writedowns range from 0.5 percent for bonds with a residual maturity of less than a year, to 4 percent for securities with a maturity of more than 10 years. For securitized debt, or the pooling of various types of debt ranging from mortgages to auto loans, minimum haircuts range from 1 percent to 7 percent, according to the FSB. For main index equities, the floor is 6 percent. Transactions based on government debt are exempt from the rule.
FSB Plans
The minimum writedowns are in many cases larger than in draft FSB plans published last year. Those plans had seen floors of 0.5 percent to 2 percent for corporate debt and 1 percent to 4 percent for securitizations, depending on maturity.
“The most important point is that the framework confirms that the FSB isn’t going to impose floors in relation to transactions based on government securities, nor indeed in the context of interbank repos,” David Hiscock, senior director for market practice and regulatory policy at the International Capital Market Association, said in an interview.
“Given the signficance” of repos “in interbank financing, it’s important that the rules will not disrupt this part of the market,” Hiscock said. The ICMA represents firms active on the financial markets, including investment banks and asset managers.
Excessive Debt
The measures should serve as a “backstop” to prevent the buildup of excessive debt outside the banking system, by stopping firms obtaining too much money against a piece of collateral, the FSB said. An overly indebted “shadow-banking system can be vulnerable to ‘runs’ and generate contagion risk,” with asset price increases during surges in confidence followed by “precipitate falls” in crises, it said.
“The levels of the haircuts appear to be reasonably proportionate. We will obviously continue to study the details,” Hiscock said. “One shouldn’t expect on the back of this that something dramatic will happen. It doesn’t dramatically change where we were.” The FSB rules also cover securities-lending agreements, a type of transaction in which one party lends a security for a fee against a guarantee in the form of financial instruments or cash.
The standards are “intended to apply to certain transactions where the primary motive is to provide financing, rather than to borrow or lend specific securities,” the FSB said. As a result, they incorporate some exemptions for securities-lending agreements that are cash-collateralized.
Numerical floors “will reduce the buildup of excessive leverage and liquidity risk by non-banks during peaks in the credit and economic cycle,” U.S. Federal Reserve Governor Daniel Tarullo, who chairs the FSB’s standing committee on regulatory cooperation, said in a statement.
The FSB, which was established in 2009, is working on how to apply the numerical floors to transactions that don’t involve a bank or broker-dealer on either side of the trade, and is seeking views on a draft approach.
Venezuela Bonds Fall as Harvard Team Says Default Likely
Venezuela’s bonds declined to a three-year low after oil fell and Harvard University economists Carmen Reinhart and Kenneth Rogoff said the South American country will probably default on its foreign debt.
The price on the country’s benchmark dollar bonds due 2027 tumbled 2.4 cents to 62.17 cents on the dollar at 1:45 p.m. in New York, the lowest level since October 2011. Yields climbed 0.63 percentage point to 16.37 percent.
Borrowing costs are surging as oil prices fall and a shortage of dollars makes it harder for the government to meet its citizens’ basic needs. The economy is so badly managed that per-capita gross domestic product is 2 percent below 1970 levels, the professors wrote in a column published yesterday by Project Syndicate. A decade of currency controls has made dollars scarce in the country with the world’s biggest oil reserves, causing shortages of everything from deodorant to airplane tickets.
“They have extensive domestic defaults and an economy that is really imploding,” Reinhart said in a telephone interview from Cambridge, Massachusetts. “What they really need to do is get their house in order. If an external default would trigger such a possibility, that’s not a bad thing.”
The suggestion that the country stop servicing its bonds comes a month after Harvard colleagues Ricardo Hausmann and Miguel Angel Santos wrote that Venezuela should consider defaulting given that it was piling up arrears to importers. Venezuela owes about $21 billion to domestic companies and airlines, according to Caracas-based consultancy Ecoanalitica.
Riskiest Debt
“People are beginning to see that a sensible strategy for the government is to default,” Joaquin Almeyra, a Miami-based bond trader at Bulltick Capital Markets, said in an e-mailed response to questions. “And oil below $90 complicates things.” Futures on Brent crude fell as much as 3.1 percent to $86.17 a barrel, the lowest level in almost four years, as the International Energy Agency said oil demand will expand this year at the slowest pace since 2009. Oil provides 97 percent of Venezuela’s dollar earnings, according to the central bank.
Venezuelan debt is the riskiest in the world, yielding 16.07 percentage points more than Treasuries, according to data compiled by JPMorgan Chase & Co. The cost to insure the country’s bonds against default with credit-default swaps is also the highest for any government globally.
“Given that the government is defaulting in numerous ways on its domestic residents already, the historical cross-country probability of an external default is close to” 100 percent, Reinhart and Rogoff wrote in their article.
‘Hit Man’
President Nicolas Maduro dubbed Hausmann a “financial hit man” and “outlaw” and instructed the attorney general and public prosecutor to take “actions” against the Venezuelan-born professor for seeking to destabilize the country.
For Venezuela to recover, Maduro must unwind policies that have fueled annual inflation of 63 percent and eroded wages, Reinhart said. The poverty rate has risen since Maduro came to power 18 months ago, climbing to 32 percent at the end of last year from a record low 25 percent in 2012, according to the National Statistics Institute.
“They’re paying no one,” Reinhart said. “At those levels, inflation is certainly expropriation.” Discontent over rising prices, soaring crime and mounting shortages sparked nationwide protests in February that were put down by soldiers and police. Forty-three people were killed in clashes, according to the public prosecutor’s office.
Making Payment
Venezuela paid back $1.5 billion of debt that matured Oct. 8. It dipped into its international reserves, pushing them to an 11-year low of $19.8 billion. The payment didn’t end the decline in the country’s bonds, which have lost 22 percent in the past three months. State-owned oil company Petroleos de Venezuela SA is due to repay $3 billion of bonds maturing on Oct. 28. It has already bought back 60 percent of the debt, a company official said Oct. 10. The company said in an e-mailed statement Oct. 11. that it will also pay interest on bonds due in 2017, 2027 and 2037 today.
There is little risk of an immediate default in Venezuela, Sebastian Briozzo, director of sovereign ratings at Standard & Poor’s, said today in an interview at Bloomberg headquarters in New York. Last month, the ratings company lowered Venezuela’s credit rating to CCC+, which implies at least a 50 percent chance of default over the next two years.
“Once we get closer to the end of next year, the situation could become more difficult,” Briozzo said. The government is prioritizing debt payments because it needs foreign investment to expand oil production, he said.
source: Bloomberg
Thirty-year bond yields dropped below 3 percent for the first time since May 2013 as reports showed U.K. inflation dropped to a five-year low in September and German investor confidence eroded. A gauge of inflation expectations measured by the difference between yields on 10-year notes and similar-maturity inflation-index debt traded close to the lowest in more than a year. Volatility reached the highest level since January.
“There is some fear that something else will weaken in terms of economic growth around the world,” said Aaron Kohli, an interest-rate strategist BNP Paribas SA in New York, one of 22 primary dealers that trade with the Fed. “When the Fed attempts to remove liquidity from the system, you start to see the cracks appear.”
The two-year note yield dropped five basis points, or 0.05 percentage point, to 0.38 percent at 3:02 p.m. New York time, according to Bloomberg Bond Trader prices. The 0.5 percent securities maturing in September 2016 added 3/32, or 94 cents per $1,000 face amount, to 100 7/32. The yield fell as much as six basis points, the largest decline since September 2013.
Market Prices
The 30-year (USGG30YR) bond fell five basis points to 2.96 percent and touched 2.94 percent, the lowest since May 3, 2013. The benchmark 10-year yield dropped seven basis points to 2.21 percent. It earlier reached 2.19 percent, a level not seen since June 2013.
Jeffrey Gundlach, chief executive officer of money management firm DoubleLine Capital LP in Los Angeles, which oversees $56 billion, said in an interview on CNBC that 10-year yields will reach a bottom at 2.20 percent. The difference between yields on 10-year notes and similar-maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt, reached 1.92 percentage points, almost the lowest since June 2013.
The Bank of America Merrill Lynch MOVE index, a gauge of Treasuries volatility, rose to 68.69 on Oct. 10, the highest level since Jan. 9. Traders see a 45 percent chance the Fed will raise its benchmark rate by its September 2015 meeting, fed funds futures data compiled by Bloomberg show. That’s down from a 74 percent chance as of Oct. 1. The target rate has been maintained in a range of zero to 0.25 percent since 2008 to support the economy.
Fed Policy
“Markets are realizing the Fed is pivoting,” said Guy Haselmann, an interest-rate strategist at Bank of Nova Scotia in New York, one of 22 primary dealers that trade with the U.S. central bank. We’re moving “toward an environment of lower global growth and inflation. Rates will stay low for a long period of time.”
While the Fed is set to end its bond-purchase stimulus program this month, the prospect of monetary tightening has been tempered by concern that output is sagging from Europe to China. Germany will probably grow by 1.2 percent this year and by 1.3 percent in 2015, marking respective drops from 1.8 percent and 2.0 percent forecast in April, the Economy Ministry said today in its biannual review.
The ZEW Center for European Economic Research’s index of investor and analyst expectations slid to the weakest level in almost two years in Europe’s biggest economy. U.K. consumer-price growth slowed to 1.2 percent in the 12 months through September, the lowest since September 2009 and below the Bank of England’s 2 percent target for a ninth month.
Fed Vice Chairman Stanley Fischer underscored concern the global economy is slowing, fueling speculation the central bank will push back the timing for raising interest rates.
Fischer View
“If foreign growth is weaker than anticipated, the consequences for the U.S. economy could lead the Fed to remove accommodation more slowly than otherwise,” Fischer said in an Oct. 11 speech at the International Monetary Fund’s annual meetings in Washington. Minutes of the Fed’s September gathering released Oct. 8 showed officials highlighted concern that deteriorating growth abroad and a stronger dollar may hurt the domestic economy by curbing exports and damping inflation.
“All eyes are on Europe,” said Thomas Roth, senior Treasury trader in New York at Mitsubishi UFJ Securities USA Inc. “The negative sentiment is hurting, and you can look at how the market’s changed since the minutes.” Analysts surveyed by Bloomberg last week cut their 10-year yield forecast for the end of 2014 to 2.71 percent, the lowest in data going back to July 2013.
Repo Traders Face FSB Collateral Rule in Shadow Bank Push
Traders are facing new global rules on how they determine the value of collateral in repo transactions as regulators seek to prevent panic writedowns that are seen fueling future financial crises.
The Financial Stability Board, a global group that brings together central bankers and government officials from the Group of 20 nations, today published a set of guidelines on discounts applied to collateral handed over as part of repurchase-agreement trades and other securities-financing transactions that aren’t processed through clearing houses. It also set minimum standards for some types of trades.
Global regulators are targeting so-called shadow banks with tougher rules to prevent a repeat of the turmoil that followed the 2008 collapse of Lehman Brothers Holdings Inc., which was driven in part by difficulties determining the value of securities. The European repo market is worth 5.8 trillion euros ($7.4 trillion), according to latest available data from the International Capital Market Association. The rules, set to take effect by the end of 2017, are “a big step forward in the FSB’s overall work program to transform shadow banking into resilient market-based financing conducted on a sound basis,” Bank of England Governor Mark Carney, who chairs FSB meetings, said in a statement.
‘Stress Period’
Repos are a major source of short-term finance for banks, allowing them to use securities as collateral for short-term loans from investors such as other banks or money-market mutual funds. They are also used by the shadow-banking system, or non-bank financial intermediaries, seeking funding. Collateral serves as protection for a lender against a borrower’s default.
The FSB standards set out what it called qualitative criteria that should be used by traders when calculating the discount that should be applied to collateral. “Haircuts should be set to cover, at a high level of confidence, the maximum expected decline in the market price of the collateral asset,” the FSB said. This “should be calculated using a long-time series of price data that covers at least one stress period.”
“In anticipation of tighter regulation in this area, many institutions have already substantially reduced their repo business and this has been leading to a shortage of liquidity for what might be considered legitimate lending business,” Richard Reid, a research fellow for finance and regulation at the University of Dundee in Scotland, said in an e-mail.
‘Really Struggling’
“This highlights the current dilemma for many regulators and central bankers at present -- how to tighten up regulation in this business without putting yet more strain on the financial system’s ability to support growth at a time when many economies are really struggling,” Reid said.
In some cases, traders should adhere to a numerical “floor” set out by the FSB to ensure writedowns are large enough, the group said. This would apply when financing is provided to a firm that isn’t a bank or broker-dealer, with the collateral being any security other than sovereign debt.
For corporate debt, the minimum writedowns range from 0.5 percent for bonds with a residual maturity of less than a year, to 4 percent for securities with a maturity of more than 10 years. For securitized debt, or the pooling of various types of debt ranging from mortgages to auto loans, minimum haircuts range from 1 percent to 7 percent, according to the FSB. For main index equities, the floor is 6 percent. Transactions based on government debt are exempt from the rule.
FSB Plans
The minimum writedowns are in many cases larger than in draft FSB plans published last year. Those plans had seen floors of 0.5 percent to 2 percent for corporate debt and 1 percent to 4 percent for securitizations, depending on maturity.
“The most important point is that the framework confirms that the FSB isn’t going to impose floors in relation to transactions based on government securities, nor indeed in the context of interbank repos,” David Hiscock, senior director for market practice and regulatory policy at the International Capital Market Association, said in an interview.
“Given the signficance” of repos “in interbank financing, it’s important that the rules will not disrupt this part of the market,” Hiscock said. The ICMA represents firms active on the financial markets, including investment banks and asset managers.
Excessive Debt
The measures should serve as a “backstop” to prevent the buildup of excessive debt outside the banking system, by stopping firms obtaining too much money against a piece of collateral, the FSB said. An overly indebted “shadow-banking system can be vulnerable to ‘runs’ and generate contagion risk,” with asset price increases during surges in confidence followed by “precipitate falls” in crises, it said.
“The levels of the haircuts appear to be reasonably proportionate. We will obviously continue to study the details,” Hiscock said. “One shouldn’t expect on the back of this that something dramatic will happen. It doesn’t dramatically change where we were.” The FSB rules also cover securities-lending agreements, a type of transaction in which one party lends a security for a fee against a guarantee in the form of financial instruments or cash.
The standards are “intended to apply to certain transactions where the primary motive is to provide financing, rather than to borrow or lend specific securities,” the FSB said. As a result, they incorporate some exemptions for securities-lending agreements that are cash-collateralized.
Numerical floors “will reduce the buildup of excessive leverage and liquidity risk by non-banks during peaks in the credit and economic cycle,” U.S. Federal Reserve Governor Daniel Tarullo, who chairs the FSB’s standing committee on regulatory cooperation, said in a statement.
The FSB, which was established in 2009, is working on how to apply the numerical floors to transactions that don’t involve a bank or broker-dealer on either side of the trade, and is seeking views on a draft approach.
Venezuela Bonds Fall as Harvard Team Says Default Likely
Venezuela’s bonds declined to a three-year low after oil fell and Harvard University economists Carmen Reinhart and Kenneth Rogoff said the South American country will probably default on its foreign debt.
The price on the country’s benchmark dollar bonds due 2027 tumbled 2.4 cents to 62.17 cents on the dollar at 1:45 p.m. in New York, the lowest level since October 2011. Yields climbed 0.63 percentage point to 16.37 percent.
Borrowing costs are surging as oil prices fall and a shortage of dollars makes it harder for the government to meet its citizens’ basic needs. The economy is so badly managed that per-capita gross domestic product is 2 percent below 1970 levels, the professors wrote in a column published yesterday by Project Syndicate. A decade of currency controls has made dollars scarce in the country with the world’s biggest oil reserves, causing shortages of everything from deodorant to airplane tickets.
“They have extensive domestic defaults and an economy that is really imploding,” Reinhart said in a telephone interview from Cambridge, Massachusetts. “What they really need to do is get their house in order. If an external default would trigger such a possibility, that’s not a bad thing.”
The suggestion that the country stop servicing its bonds comes a month after Harvard colleagues Ricardo Hausmann and Miguel Angel Santos wrote that Venezuela should consider defaulting given that it was piling up arrears to importers. Venezuela owes about $21 billion to domestic companies and airlines, according to Caracas-based consultancy Ecoanalitica.
Riskiest Debt
“People are beginning to see that a sensible strategy for the government is to default,” Joaquin Almeyra, a Miami-based bond trader at Bulltick Capital Markets, said in an e-mailed response to questions. “And oil below $90 complicates things.” Futures on Brent crude fell as much as 3.1 percent to $86.17 a barrel, the lowest level in almost four years, as the International Energy Agency said oil demand will expand this year at the slowest pace since 2009. Oil provides 97 percent of Venezuela’s dollar earnings, according to the central bank.
Venezuelan debt is the riskiest in the world, yielding 16.07 percentage points more than Treasuries, according to data compiled by JPMorgan Chase & Co. The cost to insure the country’s bonds against default with credit-default swaps is also the highest for any government globally.
“Given that the government is defaulting in numerous ways on its domestic residents already, the historical cross-country probability of an external default is close to” 100 percent, Reinhart and Rogoff wrote in their article.
‘Hit Man’
President Nicolas Maduro dubbed Hausmann a “financial hit man” and “outlaw” and instructed the attorney general and public prosecutor to take “actions” against the Venezuelan-born professor for seeking to destabilize the country.
For Venezuela to recover, Maduro must unwind policies that have fueled annual inflation of 63 percent and eroded wages, Reinhart said. The poverty rate has risen since Maduro came to power 18 months ago, climbing to 32 percent at the end of last year from a record low 25 percent in 2012, according to the National Statistics Institute.
“They’re paying no one,” Reinhart said. “At those levels, inflation is certainly expropriation.” Discontent over rising prices, soaring crime and mounting shortages sparked nationwide protests in February that were put down by soldiers and police. Forty-three people were killed in clashes, according to the public prosecutor’s office.
Making Payment
Venezuela paid back $1.5 billion of debt that matured Oct. 8. It dipped into its international reserves, pushing them to an 11-year low of $19.8 billion. The payment didn’t end the decline in the country’s bonds, which have lost 22 percent in the past three months. State-owned oil company Petroleos de Venezuela SA is due to repay $3 billion of bonds maturing on Oct. 28. It has already bought back 60 percent of the debt, a company official said Oct. 10. The company said in an e-mailed statement Oct. 11. that it will also pay interest on bonds due in 2017, 2027 and 2037 today.
There is little risk of an immediate default in Venezuela, Sebastian Briozzo, director of sovereign ratings at Standard & Poor’s, said today in an interview at Bloomberg headquarters in New York. Last month, the ratings company lowered Venezuela’s credit rating to CCC+, which implies at least a 50 percent chance of default over the next two years.
“Once we get closer to the end of next year, the situation could become more difficult,” Briozzo said. The government is prioritizing debt payments because it needs foreign investment to expand oil production, he said.
source: Bloomberg