• A year ago, El Salvador’s 10-year bond yields reached 24%.
• The nation was able to repay $800 million in short-term debt and interest in January.

El Salvador was the first nation to recognize Bitcoin (BTC) as legal cash, and this year the country’s bonds have seen gains of 60%, second only to Bitcoin’s 80%.

The unexpected interest in the country’s national debt indicates a dramatic change in outlook towards the economy. A year ago, El Salvador’s 10-year bond yields reached 24%, putting it on par with other struggling nations like Ukraine and Argentina.

In spite of negative reports from the media and credit rating agencies, the nation was able to repay $800 million in short-term debt and interest in January.

Investors Opt to Hold

Morgan Stanley anticipated last year would be a good opportunity to acquire bonds from El Salvador because they expected the government to “muddle through” making interest payments. Bond prices in the country have recently become competitive with those of other developing market countries.

According to Refinitiev’s findings, the current yield on the country’s bonds is between 14% and 18%. Some investors still think it’s not time to sell out despite the gains they’ve made this year. Bond prices in El Salvador followed the same pattern as Bitcoin last year, plummeting in the summer of 2022 before recovering in the first half of 2023.

Bitcoin’s latest drop below the $30,000 threshold has likely disappointed short-term investors who pounced on the current Bull Run. Maybe it’s Bitcoin’s volatility that’s attracted long-term investors. However, there are now 14.5 million BTC owned by long-term holders, according to data compiled by Glassnode. At the time of writing Bitcoin is trading at $29,851 as per data from CMC.

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