Salvadoran bonds are suffering as the BTC law enters into force
2 min read
IN report published by Bloomberg, states that the yield curve of El Salvador bonds has recently reversed. This may be due to the introduction of BTC, but other factors need to be taken into account.
“It simply came to our notice then. Investors see shorter-term debt as riskier, but most yield curves will go up due to long-term valuation uncertainty.
Ben Emons of Medley Global Advisors emphasized that Salvadoran bonds lost a significant position. He described the introduction of BTC as a sign that the widespread use of bitcoins could have for a developing country significant consequences.
Emons doesn’t seem to evaluate negative this situation as himself. Bloomberg data show that Salvadoran bonds began to move towards an inversion in June. In the same month that the country’s parliament passed the controversial Bitcoine law.
BTC is not the only factor that puts bearish pressure on the bond market
Bukele suddenly the establishment of the Constitutional Tribunal in May, it was considered a major source of negative sentiment regarding El Salvador’s economic outlook. Bukele dismissed the Attorney General and the country’s top judges.
Since May, the spread between El Salvador government bonds and comparable US Treasuries has been widened by 12 August 77%. Bukele’s inability to secure an agreement with the International Monetary Fund also affected the outlook for the country’s bond market.
El Salvador BTC Act entered into force on 7 September. With the introduction of the government-issued digital wallet “Chivo ” there has been extensive complaints from citizens to technical problems.
