Venezuelan defaulted bonds issued by the government and its state-owned oil company PDVSA surged in early Monday trading. The sovereign bond maturing in 2027 rose by 7 cents per dollar of face value, a jump of approximately 22%, marking its largest single-day gain since 2023. This pushed the bond price to 40 cents, doubling its value from six months ago, yet it remains below the potential recovery value investors anticipate if the country advances with a debt restructuring.
Over the weekend, US airstrikes targeted Venezuela, leading to the capture of President Nicolás Maduro and his wife. Former President Donald Trump stated the US would "manage" Venezuela until a "safe" transition is implemented. Driven by this news, Venezuelan bonds staged a significant rebound, delivering substantial returns to hedge funds and other investors who had purchased this debt at deeply depressed prices.
Maduro has been in power since 2013. Over the past few months, as former US President Trump intensified pressure on Maduro, fund managers consistently increased their holdings of Venezuelan debt. Nonetheless, the events of the weekend shocked traders and world leaders alike.
Market sentiment was also buoyed by a shift in stance from Venezuela's acting President, Delcy Rodriguez. She initially demanded Maduro's release, labeling his capture a "barbaric act," but subsequently called for advancing a "cooperative agenda" with the United States. Analysts suggest that while her latest remarks might indicate a readiness to cooperate with Trump, they could also provoke anger among hardliners within the government.
Barclays stated that its previous assessment had been overtaken by developments. Consequently, just 14 hours after downgrading Venezuelan bonds to "underweight," the bank swiftly upgraded them to "neutral weight."
Bradley Wickens, founder of the emerging markets-focused macro hedge fund Broad Reach Investment Management, commented, "The projection of US power has been quite formidable, completely surpassing anyone's expectations. There is at least 50% more upside, and this scenario is highly likely to materialize."
Wickens revealed that his firm's $1.5 billion Broad Reach Master fund has gained over 5% year-to-date, building on its 12% return achieved in 2025. This surge is largely attributed to its bets on Venezuela, a position initiated late in 2024 based on the anticipation of a potential Trump election victory. The fund maintains a substantial position in Venezuelan bonds, which it still considers a "high-conviction trade."
Shares of Ashmore Group Plc, an asset manager specializing in emerging markets, surged as much as 14%, amid market speculation that the firm would benefit from the situation.
The political shift in Venezuela is triggering a "gold rush" among hedge funds. The Tribeca fund, which doubled its returns last year, plans to allocate up to 10% of its capital to the country, and its team has already traveled there for due diligence. Despite extremely high security and legal uncertainties, risk-tolerant investors are attempting to seize the initiative before larger institutions enter, viewing this as one of the "greatest investment opportunities ever."
However, analysts point out that significant questions remain regarding the extent of US influence and whether oil companies will be willing to invest in Venezuela's dilapidated oil infrastructure amid ongoing political uncertainty.
Furthermore, whether investors ultimately realize returns depends on whether Venezuela restructures its $154 billion in defaulted bonds, loans, and legal judgment debts, with creditors ranging from Wall Street to Russia.
Some hedge funds believe debt restructuring could commence as early as this year, but most investors anticipate a protracted and complex process. Citigroup reiterated its "long" recommendation on Venezuelan bonds while noting that restructuring would be "extremely complex," comparable to the Greek debt restructuring of 2012.
Nicolas Jaquier, a fixed-income portfolio manager at UK asset manager Ninety One UK Limited, stated, "A successful restructuring ultimately requires a government with legitimacy that can credibly commit to reforms, typically supported by an International Monetary Fund (IMF) support program. There remain very significant obstacles and uncertainties, and the current leadership does not possess clear legitimacy to engage in debt restructuring negotiations."
Despite this, market optimism currently prevails, with the view that a change in regime could end Venezuela's isolation from much of the global economy. This isolation has persisted for over a decade, sparking the most severe refugee crisis in the history of the Western Hemisphere.
Venezuela began defaulting on its debt in 2017. Two years later, the US severed ties with Maduro's government and prohibited US investors from purchasing the country's debt. JPMorgan reinstated these bonds into its closely watched indices in 2023 after secondary market trading sanctions were lifted. Since then, betting on Venezuelan bonds has become one of the most profitable trades in the developing world, and the rally accelerated further last year against a backdrop of rising overall risk appetite.
Previously, junk-rated sovereign bonds from countries like Lebanon and Ukraine, which have implemented reforms or emerged from default, also recorded impressive returns in 2025.
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