El Salvador’s sovereign bonds have experienced a remarkable positive upswing over the past 12 months, thanks to the strategic measures implemented by President Nayib Bukele’s administration. According to a publication from the renowned international media outlet Reuters, the country’s bonds managed to emerge from a challenging situation, crediting the success to the government’s prudent decisions, such as the sovereign debt repurchases approved by the Legislative Assembly in July 2022.
“Within a fast-paced 12 months and two unexpected debt repurchases, the country’s payment schedule has become significantly lighter until 2027. The appointment of a former IMF official as an advisor to the Ministry of Finance has also sent positive signals to the markets, according to investors. A bond maturing in 2025 is now trading at 89 cents, compared to just 27 cents a year ago,” reports the publication.
El Salvador now offers an attractive value compared to several other emerging market sovereigns with better prices. As of December, El Salvador’s debt-to-GDP ratio stood at 77%, the lowest since 2019, and it is projected to decrease by another percentage point this year before rising to 78% in 2024, as per Refinitiv data. The total public debt decreased from $25.4 billion at the end of 2022 to $19.7 billion in May of the current year, illustrating the nation’s progress in managing its debt.
Furthermore, Reuters points out that “dollar-denominated Salvadoran bonds currently yield between 14% and 18%, as per Refinitiv data.” These bonds have been the best-performing sovereign bonds in the first half of the year, delivering close to 60% in total returns. Even after such a successful streak, some experts believe that it may not be the right time to cash in.
These positive perspectives on the country’s economic management under the current government align with Bloomberg’s observations from April this year, highlighting El Salvador’s sovereign bonds as the best-performing in emerging markets.
“El Salvador’s bonds are on a roll as investors cheer the signs that President Nayib Bukele’s government is shoring up the country’s finances,” reported the magazine at the time.
In February, President Bukele himself proudly stated that those who supported El Salvador’s sovereign bonds were already reaping the second-best returns in the world. “Those who bet against our country lost hundreds of millions of dollars, while those who invested in our bonds achieved the second-best returns worldwide,” Bukele proudly shared a few months ago.
The success of El Salvador’s sovereign bonds in international markets reflects the confidence of investors in the current government’s economic strategies. As the nation continues to make progress in managing its debt and fostering a favorable investment climate, it sets a promising path towards a more resilient and prosperous future.