Morgan Stanley is pushing its investors to buy El Salvador bonds, which have been hugely successful in terms of performance following the recent cryptocurrency market crash. The country’s bitcoin gamble has not paid off this year, although it continues to invest in it.
Bloomberg reports that Morgan Stanley is suggesting investors to buy bonds from El Salvador, which took a hit following the cryptocurrency market crash. The country has invested heavily in bitcoin, and the recent market crash has led to particularly poor performing bonds this year.
Battered bonds
Bloomberg had access to a note, in which Simon Waever, global head of Morgan Stanley’s emerging markets sovereign credit strategy said this “The markets are clearly considering a high probability of the no-trade scenario in which El Salvador defaults, but there is no restructuring.” El Salvador’s 2027 bond fell to 28 cents.
El Salvador’s purchase of bitcoins is well known in the business world and some consider it an experiment. Most countries are against bitcoin being legal tender and many others are just starting to allow it as an asset.
El Salvador has effectively doubled the bear market, with the country taking advantage of the bear market to buy another 80 bitcoins. President Nayib Bukkele urged investors to be patient, as they became anxious after the recent market crash. The country’s finance minister also said the financial risk of the collapse is “extremely minimal”.
El Salvador’s bitcoin bet looks mistreated
El Salvador shocked the world – and won over some in the cryptocurrency community – when it said it would make bitcoin legal tender. The move was greeted with celebration and derision, but the market crash changed many people’s views on the matter.
Several global organizations have questioned the move and have even said 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 abandon it as a currency.
El Salvador has also urged other countries to do the same. The Central African Republic has also made bitcoin legal tender, and this too has been criticized by global authorities. While the legalization of bitcoin has its advantages for the markets, larger entities will now be wary of market volatility and share their capital accordingly.
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