Cantor Fitzgerald Stops Trading Venezuelan Bonds -- 2nd Update
Cantor Fitzgerald LP stopped trading Venezuelan debt Tuesday, days after the Treasury Department slapped financial sanctions on the country for undermining democracy.
The move is the first blanket restriction on Venezuelan bonds by a large U.S. financial institution. Trading in Venezuelan debt, until recently among the most easily purchased emerging market bonds, has slowed to a trickle this week, reflecting typical end-of-summer torpor as well as investor efforts to evaluate the impact of the U.S. sanctions.
Cantor, one of the largest intermediaries for Wall Street traders, as well as its affiliates GFI Group and BGC Partners have pulled all bonds issued by the Republic of Venezuela and state-oil company Petróleos de Venezuela SA, known as PdVSA, from auctions and told customers those trades are restricted, said three Cantor clients who asked to remain anonymous because they aren't authorized to speak to the press.
Cantor declined to comment.
On Friday, the U.S. Treasury banned U.S. financial institutions from trading any new bonds issued by Venezuela or from trading with any Venezuelan government entity. Officials said the move aims to punish President Nicolás Maduro and his administration for a move toward authoritarianism and that more financial sanctions would come if the repression continues.
"Maduro may no longer take advantage of the American financial system to facilitate the wholesale looting of the Venezuelan economy at the expense of the Venezuelan people," U.S. Treasury Secretary Steven Mnuchin said Friday.
Traders say they are slowing or stopping trades in the country's securities because of fear that they could be unknowingly buying or selling bonds on behalf of people connected to Venezuelan government.
Just $7.4 million-worth of PdVSA's flagship bond due in 2024 changed hands Tuesday, less than half the amount a year ago and down from $141 million traded on Aug. 24, the last day before the sanctions, according to MarketAxess data.
Large Wall Street investment banks that trade with investors continued to buy and sell Venezuelan bonds Tuesday, investors said. But the difference, or "spread," between the bid and offer prices quoted by the banks has widened to as much as 1 percentage point from half a point, they said, showing that the banks are charging more from clients to execute trades as the perceived risk of doing so has risen.
Venezuelan bond trading attracted public scrutiny earlier this year after the asset-management business of Goldman Sachs Group Inc. bought $2.8 billion-worth of the country's debt at about 30 cents on the dollar.
Venezuelan opposition accused the investment bank of financing the Mr. Maduro's repression of peaceful protesters. Goldman Sachs had said the bonds were bought on the secondary markets and didn't add any fresh funds to the government.
Earlier this month, Credit Suisse Group said it prohibited its traders from buying and selling two existing Venezuelan bonds because of the risk the trades would finance human rights abuses.
The policy forbids employees from trading or using as collateral two specific bonds, one issued by the Venezuelan government due in 2036, and one by state oil PDVSA due in 2022, as well as bonds from government entities issued after June 1.
The Latin America committee of the International Swaps and Derivatives Association, which oversees credit default swap trading, scheduled a special meeting for Wednesday to discuss Venezuela, a person familiar with the matter said.
--Julie Wernau and Carolyn Cui contributed to this article.
Write to Anatoly Kurmanaev at Anatoly.kurmanaev@wsj.com and Matt Wirz at matthieu.wirz@wsj.com
(END) Dow Jones Newswires
August 29, 2017 17:26 ET (21:26 GMT)