Morgan Stanley offered to buy El Salvador’s crisis-affected government bonds

The head of the international department of strategy for emerging markets at Morgan Stanley believes that the fall of the crypto market led to the depreciation of El Salvador’s Eurobonds.

Simon Waever said that these securities fell by $7.7 billion.

“Markets are clearly counting on the high probability of a scenario in which El Salvador will default, but there will be no restructuring,” Waver said.

The value of bitcoin has fallen by almost a third of its value since its all-time high in November 2021, resulting in a loss of about 48% of assets for El Salvador, which owns about $56 million worth of bitcoin. El Salvador bonds due in 2027 have fallen in price since 32 cents apiece to a record low of 26.3 cents as of July 15.

According to Waver, these bonds should trade at an average of 43.7 cents per dollar, even if the country is on its way to default. However, he acknowledges that the chances of reaching this level in the near future will be low. An investment bank expert believes that the International Monetary Fund (IMF) should play a role in a potential debt restructuring of a developing country.

“For restructuring to work, it almost always requires IMF involvement and/or a clear government push to reform. Given that this may not be a preparation for a restructuring, the matter will easily end in protracted negotiations, ”said a Morgan Stanley spokesman.

Recall that the Minister of Finance of El Salvador, Alejandro Zelaya (Alejandro Zelaya) announced in the spring the issuance of bonds backed by bitcoins. In June, Zelaya stated that the country was still not ready to issue the previously announced Bitcoin-backed bonds. The reason is the international situation.