"Venezuela’s CDS Is Now At The Same Level As Greece’s Three Months Before Its Default"

Tyler Durden's picture

In addition to being a hyperinflating, socialist banana republic with a devastated economy Venezuela has another problem: debt,  of which it has some $70 billion with $9.5 billion due this year. It also has $15.4 billion in foreign reserves, of which two-thirds or around $10 billion, are held in gold bars, which as we said last week, "limits President Nicolas Maduro's government's ability to quickly mobilize hard currency for imports or debt service."

Furthermore, with Venezuela oil prices in the low $20s, it is unclear if PDVSA can even cover its costs, let alone save up cash for debt repayment.

And while Venezuela recently enacted another gold swap this time with Deutsche Bank to allow it to monetize its gold, it remains to be seen if the local population which has so far taken all the punishments unleashed by the Maduro reign stoically, will stand idly by as the ruling regime quietly liquidates its last remaining assets.

But while Venezuela's upcoming default is not exactly news to anyone, the question remains "when" will it happen. Yes, the time is drawing close, but how close?

Today we show one attempt at an answer, coming morbidly enough, from the very bank which will be holding Venezuela's gold as part of the country's gold swap - Deutsche Bank.

This is what DB said:

Keep an eye on EM credit: Venezuela’s CDS spread has risen above 9,500bps, like Greece’s in 2011 and our EM economists worry that a “Venezuela bond default has moved closer”. Venezuela has only about $70bn of external debt, according to the BIS, but a default would increase pressure on other commodity exporters, further adding to the general market stress

The bottom line: "Venezuela’s CDS spread is now at the same level as Greece’s three months before its default" which is the strongest hint yet on how long the troubled socialist paradise has left.

Visually:

 

So is the reason why Deutsche Bank rushed to do Venezuela's gold swap, something which would lead to the German bank almost certainly ending up in possession of its physical gold in case of a sovereign bankruptcy, the result of this prediction for a T-minus 90 days before Venezuela's default? Find out some time in mid May.

As for another important tangent, if Venezuela indeed defaults, the question then becomes: what will happen to its oil production - will the successor (military) regime pump more or less. That is a question the oil bulls (and bears) better answer quick.

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holdbuysell's picture

Nobody panic. ISDA's got this. There will be no official default even if there is a default.

Stuck on Zero's picture

Venezuela will turn in 30 tons of gold in return for 900 tons of paper notes. Sounds like a good deal.

TeamDepends's picture

Have they resorted to cannibalism (socialism during rougher than normal times) yet?

Soul Glow's picture

From the looks of it, Madura has.

TeamDepends's picture

Now that you mention it, he does have the jowly look of a man engorged on long pig. And why not? It's a socialist win-win, one man slumbers with a full belly, another possibly right-wing man sleeps no more.

HardlyZero's picture

IMF (Impossible Mission Force) will start a "Jump Watch" list:

PR

Venezuela

Brazil

Spain

Greece

Italy

 

this Summer may be eventful.

Government needs you to pay taxes's picture

Venezuela knows how to fuck a counterparty for profit.  If the bank doesnt TAKE physical possession of the Venns gold pledged as collateral, they will NEVER get it.  PDVSA has been stealing money for generations.

http://www.icij.org/offshore/ponzi-scheme-used-offshore-hideaways-shuffl...

http://www.wsj.com/articles/u-s-investigates-venezuelan-oil-giant-144547...

SmittyinLA's picture

So does Goldman Sachs (Heidi Cruz) GS bailed out Venezuela regime and fucked Dominica and the Venezuelan people at the same time, and got the gold!

Dominica will never pay off their GS loan, they have to default.

ThroxxOfVron's picture

The word is: Venezuela is now actively prohibiting people from travelling to Trinidad.

...The chickens have figured out what's for dinner and are trying to flee the coop.

nmewn's picture

Of course they will, socialist "finance ministers" are some of the dumbest fuckers on the face of the planet. 

I mean, look at ours ;-)

TeamDepends's picture

(Indignant) Krugman holds several degrees, I'll have you know!

nmewn's picture

lol...well good! He's prepared himself for his stay in the socialist paradise of Caracas where he can use them to wipe his ass! 

Now thats thinkin ahead! ;-) 

ThroxxOfVron's picture

Ralph Cramden Skool of Ekinomix

nmewn's picture

Hey, how did you know my nom de guerre? ;-)

ThroxxOfVron's picture

<--- Who was that masked man?

<--- Round up the usual suspects.

NEOSERF's picture

They DO need toilet paper

 

R.R.Raskolnikov's picture

 why may?  one tranche of bonds are due at the end of this month. Furthermore, it has to pay coupons on another tranche.

johmack2's picture

except venezuela wont default, its very very rare for countries to actually default.. A technical default maybe.... like swapping old debt for longer maturing debt lower interest debt.

 

 

Lumberjack's picture

Turkey will get involved.

o r c k's picture

Turkey is on the outskirts of Caracas as we speak. WW3 is imminent. Duck and cover please.

HardlyZero's picture

and Russia, and Zika, everything in South America gettin' down

 

Cuba, Greece, PR...all showing signs of  losing it.

Stupid before Dumb.

Goldilocks's picture

Ron Paul : Why do central banks hold Gold? Bernanke : Tradition
http://www.youtube.com/watch?v=2Dj9v9s9buk (1:06)

Soul Glow's picture

Only $70 billion in debt?  They need to get themselves an exchange stabilization fund.  It's easy.  Confiscate everyone's gold, go to war, issue debt, then buy said debt when rates are high and watch all your problems disapear!  It worked for the good ol' US.

agstacks's picture

"Whoa, whoa, whoa... Default is such a...strong word. Technically, they're simply in arrears."

Cautiously Pessimistic's picture

I like that.  Here, let me try one ....  uh, some girls could be labled as 'FAT'.  But, technically, they are just 'THICK'.

orez65's picture

NO, NO, NO .... The politically correct term for fat is "well fed"

HardlyZero's picture

Healthy.  In a few years all the wealthy will be overweight.

ThroxxOfVron's picture

<--- Ya get what ya pay for

<--- No deposit no return

overmedicatedundersexed's picture

how do you turn an oil empire into this bankrupt shit hole?? oh elect socialists..nevermind.

sixsigma cygnusatratus's picture

"how do you turn an oil empire into this bankrupt shit hole?? oh elect socialists..nevermind."

This should be an election year slogan somewhere...

HeavydutyMexicanOfTheNorthernKingdom's picture

Hey Tylerii...it's time for the Junior Miners to go on a run bitchez! 

Yen Cross's picture

 Where's the " Humanitarian Aid"? 

 U.S. Crude Oil Imports