Morgan Stanley is nudging its investors to buy El Salvador bonds, which have taken a huge hit in performance after the recent crypto market crash. The country’s bitcoin bet has not paid off this year, though it continues to invest in it.
Bloomberg reports that Morgan Stanley is suggesting that investors buy bonds from El Salvador, which has taken a beating after the crypto market crash. The country has invested heavily in bitcoin, and the recent market crash has led to the bonds performing particularly poorly this year.
Battered bonds
Bloomberg had access to a note, in which Morgan Stanley’s head global of emerging-market sovereign credit strategy Simon Waever said that “markets are clearly pricing in a high probability of the autarky scenario in which El Salvador defaults, but there is no restructuring.” El Salvador’s 2027 bond has gone down to 28 cents.
El Salvador’s purchasing of bitcoin is well known in the economic world, and some look to it as an experiment. Most countries are against making bitcoin legal tender, and many more are only just beginning to permit it as an asset.
El Salvador has actually doubled down on the bear market, with the country leveraging the bear market to buy 80 more bitcoins. President Nayib Bukkele has urged investors to be patient, as they have grown anxious after the recent market crash. The country’s finance minister has also said that the financial risk of the crash is “extremely minimal.”
El Salvador bitcoin bet looking beat up
El Salvador shocked the world — and won some in the crypto community over — when it said that it would make bitcoin legal tender. The move was met with both celebration and derision, but the market crash has changed many people’s opinions on the matter.
Several global organizations have questioned the move and even said that it poses strong risks. The World Trade Organization (WTO) and the International Monetary Fund (IMF) have both spoken out against it, with the latter urging the country to drop it as a currency.
El Salvador has also spurred other countries into doing the same. The Central African Republic has also made bitcoin legal tender, and this too was criticized by global authorities. While the legalization of bitcoin has its benefits for the markets, larger entities will now be wary of the volatility in the market and apportion their capital accordingly.
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