Oil Shakes Venezuelan Debt to Its Foundations

Venezuelan debt was widely held by emerging-market investors until the summer. Many viewed the bonds as a safe bet because the country brought in ample revenue as a major oil exporter. But a nearly 50% drop in the price of crude since mid-June has left Venezuela’s finances in shambles. The price of credit-default swaps on Venezuela debt, a type of insurance, indicate a 61% chance of default in the next year and a 90% chance in the next five years. The country is an extreme example of the turmoil that sliding prices for oil and other commodities have had on emerging markets, where stocks, bonds and currencies have recently sold off from Russia to South Africa. More….