Trump Slur Rejected by Bond Traders as El Salvador Debt SoarsBy
Target of jibe pays less to borrow than U.S. a decade ago
Yields on Ukraine, African debt also trade near 4 percent
Whether or not U.S. President Donald Trump made a profane assessment of El Salvador, in the bond market the country is in more demand than ever.
In fact, the central American nation’s 2019 dollar debt has rallied so much in the past six months that at one point in January it yielded less than 4 percent. That’s the rate you would have got on 10-year U.S. Treasuries just under a decade ago.
To be fair, the yield probably says more about exuberant global asset prices than it does about El Salvador, which has a credit rating seven levels below investment-grade and one of the highest homicide rates in the world. The bonds are just one more example in the long list of securities distorted by a decade of central bank stimulus.
Emerging markets have also been on a tear lately amid a pickup in growth that has strengthened fundamentals. An exchange-traded fund that tracks developing-nation dollar debt has added $1.4 billion of new assets this year, the biggest inflow across all global government-bond ETFs, according to Bloomberg Intelligence.
El Salvador isn’t alone among deep-junk rated issuers reaping rewards from the rally. Yields on 2019 bonds of Ukraine, rated six levels below investment grade by S&P Global Inc., dipped below 4 percent in the first week of January. Debt of some African nations, which were also allegedly a target of Trump’s remark, yield even less.