Amidst El Salvador’s Economic Crisis, Morgan Stanley Offers Buy call on Bonds

El Salvador was the first country to accept Bitcoin as a legal tender in 2021 and this influenced other countries too. However, El Salvador’s decision has not worked in its favor so far.

El Salvador purchased the flagship currency at a time when the currency was trading around its all-time high. However, as Bitcoin was pulled down by more than 70% from its November high, the country’s debt has weakened its economy even further.

On the other hand, in the midst of the economic crisis, El Salvador has a buy call offer on bonds from
Morgan Stanley, an American multinational investment firm. Simon Waever, global head at credit strategy, informed his customers that Eurobonds that have been offered by El Salvador are negatively treated by the market.

The country’s bonds of 2027, have dropped from dollar’s 32 cents to 28 cents in 2022. On July 15, the bond even slid down to 26.3 cents.

Simon Waever also claims that though El Salvador’s financial position is not in a good position, its debt should sell at around 43.7 cents on the dollar. Nevertheless, Weaver also confirms that the bonds will not see those levels due to an increased monetary tightening.

El Salvador To Pay $800M In 2023

Fast forward to January 2023, El Salvador should pay $800 million on the dollar, currently, it is selling at 65 cents on the dollar. Simon Waever is of the opinion that El Salvador can easily survive another year along with the payment of the debt.

As said earlier, the country’s Bitcoin acceptance as a legal tender wasn’t accepted with open hands by the citizens last year. Also, El Salvador’s dollar bond connected with Bitcoin didn’t get a positive response.

This momentum has also gathered a negative response from the (IMF) as it is against Bitcoin being accepted as legal tender.