Venezuelan assets are rallying as the world's biggest economies recognize Juan Guaidó as the country's new president

Venezuela's credit markets are rallying after President Trump announced that he would recognise Juan Guaidó as the country's legitimate head of state. Guaidó's initial legislative challenge sent the country's bonds to a five month high which has been surpassed today. Venezuela's state-owned oil company Petroleos de Venezuela's bonds also rallied sharply. Investors appear to have fresh hopes for Venezuela with two of the country's key bonds rallying after the US and other countries announced they would recognise Juan Guaidó as the country's legitimate head of state. Eight days ago Venezuela's benchmark 2027 bond reached a five-month high at 28 cents on the dollar, but has now risen higher still to 31 cents on the dollar. Similarly, state-owned oil company Petroleos de Venezuela's bonds also rallied sharply to 20 cents on the dollar Wednesday, up from 17 cents a week ago. The country‘s bonds are nearly all in default as Venezuela’s hyperinflationary economy spirals downward. Investors have generally seen few opportunities for debt restructuring under the current administration given that Maduro's government is under US sanctions.The opposition-run congress declared incumbent President Nicolas Maduro a usurper last week, and the United States and numerous Latin American governments have called the legislature the country‘s only legitimate institution. Most Latin American countries have now backed Juan Guaidó as Venezuela's leader, as have the UK and European Union.Venezuela's economy has been tanking in recent months with GDP growth coming in at negative 17% for 2018 as the country's population struggles for basic necessities and many citizens forced to take drastic measures to survive. Maduro’s government and state-owned companies owe some $8 billion in unpaid interest and principal amid the collapse of the countrys once-wealthy socialist economy.However, improving commodity prices — oil in particular — could provide a boost to the country's economy given Venezuela's huge natural resource reserves.