El Salvador’s dollar bonds were trading higher by over a point after its congress approved a law that allowed the country to raise funds via the world’s first sovereign Bitcoin-backed bonds. As per the government, $500mn will be raised to help build a tax-free, coastal town known as Bitcoin City – this would have geothermal energy from a nearby volcano to mine digital coins. Another $500mn would be raised for buying Bitcoin, where the cryptocurrency’s price appreciation will be shared with bondholders. The Central American nation was the world’s first country to make Bitcoin a form of legal tender in 2021. The bonds are expected to be denominated in USD and pay an interest rate of 6.5% annually for 10 years.
Its dollar bonds are up over 5-6 points since the beginning of the year – its 8.625% 2029s are up from 44.5 at the beginning of the year, and currently trade at 51 cents on the dollar, yielding 24.5%.
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