El Salvador’s bonds are on a roll as investors cheer on signs that President Nayib Bukele’s government is trying to shore up finances.
(Bloomberg) — El Salvador’s bonds are on a roll as investors cheer on signs that President Nayib Bukele’s government is trying to shore up finances.
The Central American nation’s overseas notes are the best-performing in emerging markets Tuesday, with the price of $348 million of bonds due in 2025 surging to the highest since September 2021. Yields on the notes dropped to 18%, compared to a peak of more than 70% last July.
El Salvador has struggled for years to pin down a deal with the International Monetary Fund, which has repeatedly cited concerns about the nation’s adoption of Bitcoin. That — and uncertainty about debt repayments and Bukele’s policy making — had sent debt to lows last year.
The repayment of a key $800 million bond maturity in January helped restore some investor confidence. Markets got a fresh boost this week as the country was said to tap former IMF official Alejandro Werner as an adviser.
“Investors are more confident about the outlook for El Salvador,” said Katrina Butt, a senior economist at AllianceBernstein LP. Werner “may be able to propose some ideas to strengthen the public sector balance sheet” and limits the risk of unorthodox economic policy, she said.
Still, Salvadorian authorities have not given consent for the IMF to publish a staff report — which typically offers an analysis of the economic situation and policy strategy — after the organization’s annual visit to the nation, the IMF posted on Monday.
For Nathalie Marshik, a managing director for Latin America fixed income at BNP Paribas SA, preventing the release “goes against statements that they would like to negotiate a program.”
Representatives for the government didn’t directly respond to requests for comment. On Tuesday, Bukele touted the bond performance in a Twitter post.
While the nation’s sovereign spread still flashes risk, the bonds have returned an average of 28% this year, according to data compiled in a Bloomberg index. That makes El Salvador’s debt the best-performing in emerging markets so far in 2023, the data show.
“They are showing the market and bondholders they are working to further right the ship,” said Oren Barack, managing director of fixed income at New York-based Alliance Global Partners. “All steps they have taken are moving toward a more favorable outlook for the country and the external debt.”
–With assistance from Michael McDonald.
(Updates to reference IMF web post in sixth paragraph, comment in seventh and eighth.)
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