Morgan Stanley recently indicated that they see a buying opportunity with the Eurobonds of El Salvador. This is partly due to the crash and the large stock of bitcoin (BTC) that the country owns. Despite the large debt, the country can still keep its head above water. The investment bank also indicated that they can pay their bond costs for at least a year.
Despite the fact that bitcoin has risen slightly, the country is now losing about 50% on its BTC position. She first built up this position in September of last year.
The International Monetary Fund (IMF) was not happy when Nayib Bukele, the country’s president, announced his intention to buy BTC. The IMF insisted that the country refrain from adopting the cryptocurrency anyway. They indicated that this entailed a great deal of risk for the financial stability of the country.
Good time to buy the bonds
Simon Waever, the global head of emerging markets sovereign credit strategy at Morgan Stanley, is still quite positive about El Salvador’s economic outlook. He indicates that the country is unlikely to go bankrupt in times of tighter global liquidity.
“Markets clearly estimate a high probability of the autarky scenario in which El Salvador defaults, but there is no restructuring.”
El Salvador’s Financial Troubles
During this bear In the market for cryptocurrencies, we also see that El Salvador has run into financial difficulties. This is also reflected in the country’s falling bond price. This decline is of course also partly due to the aforementioned bitcoin position of Nayib Bukele. The decrease is in line with the financial problems of countries such as Ukraine, Argentina etc
The president must meet with . by January 2023 $800 million to pay the outstanding bonds. These bonds will run until 2032 with a coupon of 24%.