El Salvador’s embrace of Bitcoin angered bond investors, and as investors signaled uncertainty to emerging economies, yields soared.
September 8 report A report released by Bloomberg pointed out that the yield curve of El Salvador’s bonds has recently inverted, which means that short-term maturity bonds are now yielding higher than the yield to maturity of these instruments. It states:
“This is generally considered a bad sign because it means investors believe that short-term debt is more risky, and given the inherent uncertainty in long-term pricing, most yield curves will slope upward.”
Ben Emons of Medley Global Advisors emphasized that El Salvador’s bonds fell sharply on the “first day of the new Bitcoin law,” describing market behavior as “an unwelcome sign indicating that the widespread use of Bitcoin may affect this emerging country. have a huge impact” .
Emmons does not seem to be alone in his assessment. Bloomberg data shows that El Salvador’s bonds began to go upside down in June-the same month the country’s parliament Pass President Nayib Bukele’s controversial Bitcoin law BTC is recognized as legal tender.
related: El Salvador’s largest bank partners with Flexa for Bitcoin payments
However, El Salvador’s move to recognize Bitcoin as a legal tender is not the only force exerting bearish pressure on the country’s bond market.
Other authority figures emphasized that Booker’s sudden removal of the country’s constitutional court in May was the main source of negative sentiment about El Salvador’s economic prospects. Booker has fired the country’s attorney general and senior judges.
Since May, the spread between El Salvador’s government bonds and comparable U.S. Treasury bonds has widened 77% As of August 12, Bukele was unable to reach an agreement with the International Monetary Fund, which also affected the prospects of the El Salvador bond market.
Although El Salvador’s Bitcoin law came into effect on September 7, “Chivo” digital wallet issued by the government Saw widespread complaints technical problem From citizens.
