Morgan Stanley Optimistic on El Salvador-issued Eurobonds

Morgan Stanley Optimistic on El Salvador-issued Eurobonds

  • An $800 million bond payment is due in January 2023 on President Nayib Bukele.
  • El Salvador’s initial purchase in September last year saw a 50% drop in its value.

Investors can take advantage of the present pricing of El Salvador-issued Eurobonds because of the recent crypto meltdown, according to Morgan Stanley. As long as it can “mudd[ing] through” for at least a year, the government can satisfy its bond payments, the investment bank stated.

Since adopting Bitcoin as legal cash early, the first government to do so has plunged into grave financial turmoil. Lower bond prices illustrate El Salvador’s financial difficulties, which may be traced in part to the country’s reliance on Bitcoin as its principal form of money. Bloomberg reported that this year, the country’s 2027 bond has fallen from 32 cents on the dollar to 28 cents, hitting a record low of 26.3 cents on Friday.

Hit Hard by Bitcoin Price Fall

With an $800 million bond payment due in January 2023 on President Nayib Bukele’s plate, El Salvador is under urgent pressure. In line with other struggling economies such as Ukraine, Argentina, and so on, the yield on its benchmark bonds due in 2032 has dropped to 24 percent.

According to Morgan Stanley’s Simon Waever, the global head of emerging-market sovereign credit strategy, El Salvador is unlikely to fail despite the tightening of global liquidity. A 43.7 cents on the dollar price for the 2027 bond is in line with his projections.

Bukele’s abrupt policy shifts, including the use of Bitcoin as legal cash and the announcement of BTC bonds, have been blamed for the country’s gloomy outlook. Despite the current boost in the asset’s worth, El Salvador’s initial purchase in September last year saw a 50% drop in its value.

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