El Salvador’s dollar bonds fell to a record low as the debt of a Central American country in the “hit zone” began to trade this week.
El Salvador’s US dollar bonds fell to 64.4 cents per dollar on Monday, November 22, following news that a Central American country would use Bitcoin (BTC) bonds to fund the Bitcoin City initiative. Dollar bonds have fallen steadily since April 2021, when they peaked at $ 1.10, according to Bloomberg.
A dollar bond is a bond issued outside the United States by a foreign company or government and denominated in US dollars, not local currency.
Bloomberg reports that Monday’s fall caused the country’s debt to be ranked among the worst in global trade. Investors are worried that President Najib Bukele has banned the International Monetary Fund from helping the country with development money.
“This announcement reinforces the ‘anything but the IMF’ path before adding that bonds are falling” as the market overestimates the potential value of a setback from a fall on a solid basis for policy predictability. ”
Bitcoin Bonds will pay an annual interest rate of 6.5% in addition to 50% profit from Bitcoin in El Salvador after reimbursing the original investment costs of the mining infrastructure. According to Samson Moe, director of strategy at Blockstream, dividends will be paid in US dollars or US dollars (USDT).
Moe believes bitcoin bonds will provide an alternative way for institutional investors to acquire bitcoin without having to hold bitcoin themselves. It will also enable investors to help El Salvador grow faster. Mao, who has worked with El Salvador’s government to develop Bitcoin bonds, told Bloomberg TV on November 23:
“We try to structure it in such a way that people can present [a Bitcoin bond] to boards and board members as a regular bond, because it’s a regular bond. It just happens that a significant portion of bitcoins are tied up.”
In response to an interview with Mao Bloomberg, the podcaster and renowned bitcoin lawyer Anthony Pompliano predicted that the oversubscription would be “ridiculously increased”.
El Salvador is in talks with the International Monetary Fund for most of 2021 about a potential loan of $ 1.3 billion. These talks may become unclear when President Bukele decides to fund several local initiatives such as building schools with bitcoins versus US dollars.
About the topic: El Salvador is building 20 Bitcoin schools with Bitcoin Trust Surplus
The International Monetary Fund issued a final statement on El Salvador’s funding request on 22 November. While El Salvador’s economy has recovered quickly from the pandemic, financial deficits and high levels of public debt create large gaps in the services the country can offer, he said. …
The report added that efforts to expand access to financial services and increase growth are welcome, “but the risks associated with bitcoin as a legal tender and the new bitcoin payment and trading system need to be addressed.”
Because of these risks, Bitcoin should not be used as a legal tender. The staff recommends limiting the scope of the bitcoin law and calls for stricter regulation and supervision of the new payment ecosystem. “