El Salvador’s Bitcoin bet has not been in his favor so far. The Latin American nation took it when bitcoin was at an all-time high. While their goal is to profit from Bitcoin, the indebted country is even more indebted after bitcoin fell by 70%.
But banking giant Morgan Stanley has a buy call on bonds from El Salvador despite them being the worst performing notes this year. Simon Waever, the global head of emerging-market sovereign credit strategy, told clients that El Salvador’s eurobonds have been overly punished by the market.
El Salvador’s 2027 bonds slumped 32 cents on the dollar to 28 cents this year. Last Friday, it touched a record low of 26.3 cents. Waever said:
Markets are clearly pricing in a high probability of the autarky scenario in which El Salvador defaults, but there is no restructuring
According to Waever the debt should have been traded at 43.7 cents, he admits that this is unlikely due to the global crisis.
El Salvador’s Upcoming Debt Payments
El Salvador has 800 million dollars of debt to be paid in 6 months, although the country owes it, waever thinks they can pay this upcoming debt.
The market sentiment around El Salvador is due to the country’s recent policies. President Nayib Bukele has drawn severe criticism for announcing Bitcoin payments as legal tender last year. Besides, the country didn’t get any good response to the dollar-bond sale linked to the token.
With its Bitcoin policies, El Salvador has also ruffled feathers with the International Monetary Fund (IMF). Waever added:
For a restructuring to work, it nearly always needs the IMF involved and or there to be a clear push for reform by the government. Given this may not be the set-up in a potential restructuring, it could easily end up being a protracted negotiation.