El Salvador’s sovereign debt bonds achieved the best performance in emerging markets this Thursday, according to an analysis by Bloomberg. Global stock markets reacted positively to the first interest rate cut by the U.S. Federal Reserve (Fed) since 2020, sparking investor enthusiasm.
Bloomberg’s report highlights two key factors behind the surge in Salvadoran bonds: President Nayib Bukele’s commitment to fiscal discipline for the 2025 budget, and investors’ increased appetite for higher-yield assets following the Fed’s decision.
“Investors are adding risk to high-yield credits after the Fed’s rate cut, and El Salvador is benefiting after lagging behind Ecuador and Argentina this year,” said Siobhan Morden, head of Latin American fixed income at Bloomberg.
On Thursday, El Salvador’s bonds maturing in 2032 saw gains between 0.88% and 3.2%, while 2035 bonds rose between 1.70% and 3.70%. Bonds maturing in 2025 posted a more modest increase of 0.01%.
In a national address on Sunday, President Bukele reiterated that the 2025 budget, to be presented to the Legislative Assembly on September 30, will not include any debt for current spending. He also promised that the nation would pay interest on inherited debt from its own production.
For the first time in decades, Bukele announced that the 2025 budget would be “completely financed” without borrowing, a move seen as a major step towards fiscal responsibility. The budget will cover both current expenses—such as salaries and interest payments—and capital investments in infrastructure and social projects.