By Rodrigo Campos

NEW YORK (Reuters) – El Salvador bond spreads to U.S. Treasuries hit a record high on Thursday on growing investor fears the Central American nation will not reach a potential $1 billion loan agreement with the International Monetary Fund and faces negative credit implications linked to its use of bitcoin.

S&P Global (NYSE:) said risks associated with the country’s adoption of bitcoin as parallel legal tender to the U.S. dollar “seem to outweigh its potential benefits” and there are “immediate negative implications for credit.”

S&P also said the use of bitcoin threatens a potential deal between El Salvador and the IMF.

The spread of government bonds to U.S. Treasuries comparable to the one in El Salvador rose to 986 basis point on Thursday. This is an increase that surpasses the May 2020 record.

(Graphic: Salvadoran bond prices tumble, https://graphics.reuters.com/ELSALVADOR-DEBT/BONDS/klvykgddjvg/chart.png)

Bonds prices are near the lows hit last October, before rallying to record highs in mid April.

Siobhan Morden of Amherst Pierpont Securities’ Latin America Fixed Income Strategy, stated in a client letter that “these new price lows might encourage capitulation by core long positions which are forced to assess their overweight positions without an IMF Anchor.”

“The political agenda continues to dominate the economic agenda. It lacks clear guidelines on budgetary funding, no visible commitment to fiscal discipline, and has a political agenda which is a hindrance to investment and growth.

On Wednesday thousands marched in protest of President Nayib Bukele’s apparent power grab. He is otherwise well-liked by the people. A protest was held against the government’s policy. An ATM which allows the exchange of cryptocurrency for dollars was also vandalized.

Bukele’s relationship with the United States has soured due to the rapid firing of Supreme Court justices in May. The court also recently ruled that the president could serve two consecutive terms. It opened the doors for Bukele for the 2024 election.

U.S. votes are the most important for IMF loans decisions.

Gerry Rice, Fund spokesperson stated earlier in the day that El Salvador’s potential IMF program is under discussion. He added that both anti-corruption and fiscal responsibility were high up on his agenda.

The Fund did not immediately respond to a request for comment regarding S&P’s statement on risks to a potential deal.