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El Salvador’s junk-rated bonds have experienced a significant surge in value in the past six months, with the value of the country’s bonds up 62%. This is part of a market-wide trend in junk-rated bonds in 2023, with El Salvador’s bonds outperforming the Invesco Emerging Markets Sovereign Debt.
El Salvador’s international bond rally is far from over, as it has outperformed the Invesco Emerging Markets Sovereign Debt ETF (PCY), one of the largest holders of the country’s debt. El Salvador declared Bitcoin a legal tender in mid-2021, but since then, there have been frictions with the IMF and credit rating agencies, downgrading El Salvador’s debt rating. As of April, the island nation holds 2546 BTC, which were acquired at $108.2 million.
El Salvador’s debt payback schedule looks light until January 2025, with total returns near 60%. According to data from an American-British data intelligence firm, Salvadoran dollar bonds currently yield between 14% and 18%, making them the best-performing sovereign bonds in the first half of the year. El Salvador is uniquely positioned as one of the highest yielding ‘performing’ distressed credits.
