Rising tensions between Washington and President Nayib Bukele's government, dwindling prospects of a financing deal with the International Monetary Fund (IMF) and the fallout from bitcoin becoming legal tender against a wider difficult macro backdrop had seen El Salvador bonds drop to a quarter of face value last July.
"In the summer of 2022, El Salvador bond prices were divorced from fundamentals," said Aaron Stern, managing partner and chief investment officer at Converium Capital in Toronto, who has been holding the country's bonds since last year.
"The market was concerned about the administration's willingness to pay," he said, but even now El Salvador offers attractive value when compared to a number of better priced emerging market sovereigns.
These were the best performing among sovereign bonds in the first half of the year, with total returns near 60%.
"In a year where carry is the main driver of total returns, investors are going to be reticent to take profits too early," said BNP Paribas' Nathalie Marshik, a managing director for Latin America fixed income.
Persons:
Nayib Bukele's, buybacks, Aaron Stern, Alejandro Werner, Bukele, there's, Shamaila Khan, Nathalie Marshik, Marshik, Rodrigo Campos, Karin Strohecker, William Maclean
Organizations:
YORK, Central, International Monetary Fund, El, IMF, Converium Capital, Reuters, Emerging Markets, Asia Pacific, UBS Asset Management, Reuters Graphics JPMorgan, Thomson
Locations:
El Salvador, Central American, Washington, Toronto, it's, America