El Salvador’s decision to embrace Bitcoin has resulted in unhappy bond investors, with yields spiking as investors signal uncertainty for the emerging economy.
El Salvador’s bonds has recently inverted, which means bonds with short-term maturities are now yielding more than is due from the instruments.
Ben Emons of Medley Global Advisors emphasized that El Salvador’s bonds lost significant ground “on the first day of its new Bitcoin Law,” describing the market action as “an unwelcome sign that the wide use of Bitcoin may have major implications” for the emerging country.
Emons doesn’t appear to be alone in his assessment, with Bloomberg’s data showing that El Salvador’s bonds began moving toward inversion in June,the same month during which the country’s parliament passed President Nayib Bukele’s controversial Bitcoin Law recognizing BTC as legal tender. However, El Salvador’s move to recognize Bitcoin as legal tender is not the sole force exerting bearish pressure on the country’s bond market.
While El Salvador’s Bitcoin Law took effect on Sept. 7, the rollout for the government-issued “Chivo” digital wallet saw widespread complaints of technical issues from citizens.
