Venezuelan sovereign bonds could pump by 9%, and bonds from the state oil company PDVSA might surge by 16%, despite the recent price action, Morgan Stanley stated on Wednesday. The optimism is fueled by the U.S. Treasury's license allowing Venezuela to hire legal and financial advisors.
According to Morgan Stanley strategist Simon Weaver, the issuance of the license is a crucial first step towards potential debt restructuring — both sovereign and PDVSA debt.
However, the license does not allow for actual negotiations or an agreement on restructuring. By limiting the license's scope to hiring advisors, the U.S. maintains control over the process and seemingly intends to use subsequent stages of restructuring as a diplomatic leverage, noted Weaver.
Future price movements will hinge on tangible improvements: increases in domestic oil production, better macroeconomic indicators, and strengthening of state institutions, as highlighted by Morgan Stanley.
The investment bank views this development as a positive signal for Venezuelan sovereign debt and PDVSA bonds, but warns that growth rates may slow: the process remains under stringent control by U.S. regulators and requires fundamental improvements in Venezuela's economy.