JPMorgan polls investors on Venezuela bond weightings

JPMorgan has communicated with the bondholders of Venezuela to normalize the weighting of the international bonds of the country in its widely followed family of EMBI indices, three sources with direct knowledge said.

The talks come after the United States lifted sanctions on the trading of certain Venezuelan and state-owned PDVSA bonds in the secondary market. The restrictions were lifted in response to an agreement reached between the country’s government and opposition parties for the 2024 elections.

JPMorgan’s indexes team, which has not yet made any statements about the future treatment of Venezuelan bonds, has informally contacted investors to discuss the issue, the sources said.

JPMorgan did not respond to a request for comment on this process.

Venezuela and PDVSA have around US$60 billion in outstanding bonds that are in default.

The Wall Street bank had theoretically kept the bonds in its influential emerging-market fixed-income index, but reduced its weighting to zero in November 2019, after Washington imposed a sweeping sanction.

At the time, JPMorgan indicated that an easing of trade restrictions could trigger a “positive index observation”, while the weightingwould probably normalize in proportion to the prevailing market capitalization” and it would occur in phases.

JPMorgan’s EMBI indices are the main benchmark for hard currency bonds issued by emerging market countries and increasing Venezuela’s weighting would trigger buying by index funds.

The decision on membership in the index and its weighting is made by JPMorgan, although any changes are usually made after consultation with investors.

Source: Reuters