02 de agosto de 2017 14:29 PM
Actualizado el 02 de agosto de 2017 14:38 PM
According to the latest weekly report from financial firm Torino Capital, “Over the past six months, PDVSA and Venezuela yield curves have once again become inverted, displaying a strong negative slope.”
The investment bank observes “steady increase in the default probabilities implicit in Credit Default Swaps.”
“Typically, yield curves have positive slopes, as issuers pay higher costs for long-term financing. Highly distress debtors, in contrast, sometimes develop inverted slopes, as markets become fearful of a short-term credit event,” they reasoned.
In the event of a default, “it is often assumed that all bonds will receive their recovery value; this drives the price of near-term bonds down significantly, pushing up their yields.”
Based on the paper, “the probability of a Venezuela default within the next five years rose to 95.6% last Friday, while that for a Pdvsa default reached 97.8%.”
“A similar increase has occurred with the 1-year default probabilities, which are now at 62.8% for the sovereign and 67.5% for Pdvsa,” Torino Capital added.