Nayib Bukele Says El Salvador Paid Full $800 Million of Maturing Foreign Bond

El Salvador’s foreign bonds rallied an average of 24% this month as the maturity date approached, according to data compiled by Bloomberg

Nayib Bukele, en su discurso de rendición de cuentas por su tercer año de mandato como presidente de El Salvador.
By Sydney Maki and Maria Elena Vizcaino
January 24, 2023 | 09:50 AM

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Bloomberg — El Salvador’s Bitcoin-touting President Nayib Bukele said the nation fully repaid a maturing foreign bond, staving off default after securing a last-minute loan and buying back millions of dollars of its own debt.

Bukele on Tuesday announced payment of principal and interest on $800 million of the Central American nation’s dollar bonds maturing Jan. 24. While a portion of the debt had been previously repurchased through government buybacks, about $604 million came due on Tuesday.

El Salvador’s foreign bonds rallied an average of 24% this month as the maturity date approached, according to data compiled by Bloomberg. Optimism had caught on among investors and analysts after the country locked in a $450 million loan from a multilateral lender, the Central American Bank for Economic Integration, and carried out two debt repurchases.

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After a successful payment, “we would expect the curve to rally somewhat,” especially the bonds due in 2025 and 2027, said Nathalie Marshik, a managing director for Latin America fixed income at BNP Paribas. “The rally should be limited, though, because the payment is expected by the market and priced in.”

Even so, investor concern lingers regarding El Salvador’s bonds due to the symbolic firing of several top judges, the nation’s risky bets on Bitcoin and the lack of a deal with the International Monetary Fund.

Investors demand an extra 14 percentage points of yield to hold El Salvador’s dollar debt rather than US Treasuries, according to JPMorgan Chase & Co. data, well above the threshold for debt to be considered distressed.

The nation still has about $6.4 billion of foreign bonds outstanding after the 2023 maturity, with the next major principal payment due in 2025, according to data compiled by Bloomberg. The $348 million of those notes, which come due on Jan. 30, 2025, hovered just below 73 cents as of 9 a.m. in New York.

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“With the largest payment out of the way, now El Salvador can fully exploit the gap created by its previous buybacks,” said Santiago Resico, a strategist at TPCG. “The administration can now bide its time to prepare for both the 2025 and 2027 sinkings, having several years to accumulate primary surpluses to face its obligations in the medium run.”

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