By Carolyn Cui 

Venezuelan bond prices tumbled to their lowest levels of the year as default fears grew following U.S. President Donald Trump's threat to impose sanctions on the country.

State-owned oil producer Petróleos de Venezuela SA's bonds due in November fell 2.9% late in New York trading Monday and have tumbled 7.6% over the past six sessions, now at their lowest levels since December, according to Thomson Reuters data. The government's bonds due in 2038 were down 10% during the period after falling 4.3% on Monday.

A selloff in the country's debt has accelerated since Mr. Trump's statement a week ago, which followed a referendum by millions of Venezuelans that rejected President Nicolás Maduro's plan to rewrite the country's constitution. Mr. Trump called Mr. Maduro "a bad leader," and said that the U.S. "will take strong and swift economic actions" unless Mr. Maduro abandons plans to pick a new constituent assembly on July 30, which could bypass the current congress under the opposition's control.

The statement has fueled concerns that the U.S. might unveil a new round of sanctions on Venezuela that could cripple the country's energy sector. Oil exports are the primary source of dollar revenues for Venezuela, analysts say. Meanwhile, the head of PdVSA's union is calling for oil workers to join an anti-Maduro strike, which could also lead to disruptions to the country's oil production.

"If there's a sudden interruption in terms of cash flow, they are not going to pay anything," said Siobhan Morden, head of Latin America fixed-income strategy at Nomura Securities International. "The perception is for near-term default."

So far the U.S. administration hasn't detailed the possible sanctions, but a senior U.S. administration official said last week one option could be to ban Venezuela's crude-oil exports to the U.S.

Buying Venezuelan debt was a winning trade last year, before it recently turned into a tough undertaking.

For years, some investors have been scooping up near-term bonds issued by Venezuela at deep discounts, collecting coupon payments and betting that the government would service its debt as long as it can. That trade returned 53% in 2016, a top performer in emerging markets, according to J.P. Morgan Securities LLC. For the first half of 2017, these bonds were up 2.5%, while emerging-market debt gained 6.2%.

Lately, the combination of a challenging political environment and strained finances has raised questions over the government's willingness and ability to pay.

Between its sovereign and PdVDA bonds, Venezuela still has about $5 billion in principal and coupon payments until the end of the year. Its total international reserves, including gold, have fallen to about $10 billion, a 15-year low, according to its central bank.

In May, Venezuela sold bonds worth $2.8 billion to Goldman Sachs Asset Management at a 69% discount as a way to raise cash.

Given the already-severe economic and humanitarian crisis in Venezuela, some analysts say they are skeptical the U.S. will impose harsh sanctions on the country's oil sector.

Ms. Morden, who expects the sanctions to be on individuals, said "until we have some definition, the market will remain jittery."

Write to Carolyn Cui at carolyn.cui@wsj.com

(END) Dow Jones Newswires

July 24, 2017 17:19 ET (21:19 GMT)

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