Most bond markets have reacted positively to the drop in oil prices. But it is an entirely different story for oil producing nations, in particularly Venezuela, and markets are bracing themselves for a default, says Simon Fasdal, Saxo Bank’s Head of Fixed Income.

Venezuelan sovereign bonds have plunged as low oil prices threaten the country’s oil revenues, driving yields to an all-time high. Oil accounts for 96% of Venezuela’s export sales.

While Russia is not teetering on the brink of default, both sovereign and corporate bond markets are severely impacted by the plunge in oil prices. Simon says that some Russian investment-grade corporate bonds are now viewed more or less as junk.