Morgan Stanley Says Renewed Demand to Push Venezuela Debt Higher

JPMorgan’s decision to allow bonds from Venezuela and PDVSA to re-enter widely followed EM debt indexes should push notes slowly higher, to around 20-25 cents on the dollar and 15-20 cents on the dollar, respectively, Morgan Stanley strategist Simon Waever wrote in a note to clients.

• Sees about 55% of funds needing to add the debt due to having zero or being below the benchmark
• Assuming all those underweight move to market-weight, and adjusting for EMBI core exclusion, potential buying estimated at $0.7 billion market value or $4 billion notional
• ESG constraints could keep funds from adding, as is the ...