El Salvador gives itself 7 years to become debt free which is weighing down its finances and slowing down its growth for ages. Since the arrival of the young Nayib Bukele at the head of the country, the situation has almost changed: legalization of bitcoin, project to create a “Bitcoin City”, issuance of “Volcano bonds” backed by the queen of cryptocurrencies… Despite all this, Salvadorans show a certain degree of hesitation in adopting bitcoin. Fortunately for President Bukele this digital asset has its unexpected effects : BTC is at the origin of a rally in Salvadoran bonds.
In short
- El Salvador’s bonds are blowing up the counters; Santander believe they defy the law of gravity
- Salvadoran treasury bonds have continued to amaze major banking institutions since the country adopted bitcoin.
Salvador, this bitcoin paradise achieves great financial performance
Could Nayib Bukele offer himself a second term despite his risky initiatives? Yes of course. Because in addition to its choice to adopt bitcoin, theinstigator of bond rallies who did not pass under the radar of Wall Street, the young Salvadoran president also put an end to the problems of insecurity consuming the country.
“ NEW: Santander writes a laudatory article on the tax situation in El Salvador.
‘El Salvador Bond Rally Almost Defies Gravity’. »
Here is what Santander Bank has to say about this:
“ El Salvador Bond Rally Almost Defies Gravity With bond prices that are now comfortably in the 70s And returns close to the threshold which could soon suggest market access. El Salvador has now converged with credits with a split B/BB rating like the Bahamas and the yields at 11%-12% are perhaps a few points away from fully normalizing for access to Eurobond markets. The recovery of the princes of assets was carried out on the basis ofa series of political measures which, in the end, bear witness toa commitment to honor debt payments. The solvency risks linked to the budget deficit of 2% of GDP and the high debt stock are still not resolved: however, the possibility of expanding access to financing would provide greater flexibility which could validate a circle virtuous and reduce the risk of failure. »
In other words, the first country in the world to legalize bitcoin has just obtained good marks from the first Spanish bank, Santander. The latter notably specified that the strategies established by the Bukele administration seem effective in honoring the country’s debts.
Bitcoin, traditional banks and fintechs at work
According to Authorsthe rise in El Salvador’s bonds is propelled by:
- L’debt maturity extension ;
- and one agreement with Google Cloud.
So, no place for bitcoin, the crypto that Nayib Bukele cherishes so much?
We have learned that the Salvadoran government has accepted a proposal from a group of eight private banks to extend the maturities of short-term local bonds. This extension will take place between two, three, five and seven years.
The local Ministry of Finance spoke ofan envelope of 1.45 billion dollars to complete this mission.
“ The agreement with the private banks shows once again that the government is ready to take measures at the national level to continue to meet its external obligations Says Nathalie Marshik, Managing Director for Fixed Income in Latin America at BNP Paribas.
Also, Reuters noted theexistence of a 7-year strategic partnership between Nayib Bukele and Google Cloud. Objective: digitization of the administration and modernization of the health and education sectors. What ” significantly improve macroeconomic fundamentals in El Salvador over time says Katrina Butt, senior economist at AllianceBernstein.
Some observers also argue that a good understanding with the United States could complement this bullish sentiment with El Salvador’s bonds. What about the effect of a bitcoin bull run? The April 2024 halving could completely change the situation in this country.
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