Investors have been speculation that index providers such as JPMorgan could exclude PDVSA's debt from their key benchmarks after the United States imposed sweeping sanctions on the firm on Monday. "As a result, benchmarked investors would become overweight Venezuela risk," Jane Brauer, sovereign debt fixed income strategist at BAML wrote in a note to clients late on Tuesday.
Trading in Venezuelan debt ground to a halt on secondary markets on Tuesday, further adding to expectations that the debt could be excluded. Liquidity - the ease of trading - is a key requirement for index membership. PDVSA has a weight of 0.53 while Venezuela Republic bonds were at 0.66 as of earlier this week in JPMorgan's EMBI Global Diversified index, according to the index provider. PDVSA's 2024 issue - previously one of the most heavily traded issues - was indicated at 0.25 cents weaker at 25.25 cents in the dollar on Wednesday.