Venezuela: Sovereign CDS & Debt

Credit, Macro


Highlights

As risky as the credit is, the presenter likes the asymmetry of a bet on Venezuela at this time. Specifically, he believes the country may not default on its sovereign debt in the near term, especially in the event that the price of oil recovers. He has structured similar plays before, including bets on Greece, the Ukraine, and Argentina. The potential for the front end of the CDS to rally vis a vis the back end could result in a ~5:1 payout on a 1-year/ 5-year play, and a ~10:1 payout on a 2-year/ 5-year pairing. He said the thesis can also be expressed through an investment in Venezuela’s sovereign debt, but focused the discussion on the CDS bet as the CDS is dislocated relative to the bonds.

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Idea Discussion

Commentor 1 - 2 weeks ago

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