Morgan Stanley is pushing its investors to buy El Salvador bonds, which took a huge performance hit after the recent crypto market crash. The country’s bitcoin bet hasn’t paid off this year, although it continues to invest in it.
Bloomberg reports that Morgan Stanley is suggesting investors buy bonds from El Salvador, which took a hit after the crypto market crash. The country has invested heavily in bitcoin, and the recent stock market crash has led to bonds performing particularly badly this year.
Beaten Bonds
Bloomberg had access to a note in which Simon Waever, global head of Emerging Markets Sovereign Credit Strategy at Morgan Stanley, 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 fell to 28 cents.
The purchase of bitcoins by El Salvador is well known in the economic world, and some see it as an experiment. Most countries oppose bitcoin as legal tender, and many more are just beginning to allow it as an asset.
El Salvador actually doubled down in 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 grew anxious after the recent stock market crash. The country’s finance minister also said the financial risk of the crash was “extremely minimal”.
El Salvador Bitcoin Bet Seems Beaten
El Salvador shocked the world – and won over some in the crypto community – when it said it would make bitcoin legal tender. The move sparked both celebration and derision, but the stock market crash changed many people’s minds on the matter.
Several world organizations questioned this decision and even declared that it posed 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 also encouraged other countries to do the same. The Central African Republic has also made bitcoin legal tender, which has also been criticized by global authorities. While bitcoin legalization has its benefits for the markets, large entities will now be wary of market volatility and allocate their capital accordingly.
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