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El Salvador’s Dollar Bond Yields 70% Annual Return

El Salvador’s bond market has witnessed a strong rebound, despite the scepticism about the government’s decision to adopt Bitcoin as legal tender

El Salvador's Dollar Bond Yields 70% Annual Return

El Salvador’s bond market has become the best-performing bond among emerging markets, as the national dollar bond return rate reached 70%.

A dollar bond is issued in US dollars but outside of the US. This financial tool is often used by foreign companies or governments since using their local currency presents more FX risks for international investors.

As reported by Bloomberg, major financial players such as JPMorgan Chase & Co., Eaton Vance, and PGIM Fixed Income have either spoken in favour of or actually purchased the country’s dollar bonds, believing in their future potential.

Earlier, the market was largely abandoned by Wall Street investors. The scepticism was triggered by the decision of El Salvador’s President, Nayib Bukele, to make Bitcoin the country’s official currency. The reaction of Wall Street giants, however, didn’t stop the country from pursuing its crypto ambitions.

El Salvador introduced Bitcoin Volcano Bonds, passed the Digital Assets Issuance bill to fund building ‘Bitcoin City’, removed all possible taxes that might hinder tech innovation, and started developing an ambitious $1B Bitcoin mining park project.

The country today has a Bitcoin treasury of 2,924 coins valued at around $85.3 million. Although the investment is down almost 30%, due to its crypto-friendliness, El Salvador has become an attractive place for crypto exchanges and digital asset providers, which could be a positive factor for the local economy.

At the same time, President Bukele continued to soothe the investors’ bond market’s concerns with two consecutive debt buybacks and the successful repayment of $800 million worth of bonds. In addition, the country reportedly hired a former International Monetary Fund (IMF) advisor, Alejandro Werner, to help mitigate cryptocurrency-related risks in a possible deal with the multinational lender.

Nina Bobro

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Nina is passionate about financial technologies and environmental issues, reporting on the industry news and the most exciting projects that build their offerings around the intersection of fintech and sustainability.