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 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. Government bond spreads to comparable U.S. Treasuries rose to 986 basis points on Thursday, surpassing the previous record high spread hit in May 2020. (Graphic: Salvadoran bond prices tumble, )Bonds prices are near the lows hit last October, before rallying to record highs in mid April. “These new price lows may encourage capitulation from core long positions that are forced to reassess their overweight positions without an IMF anchor,” Siobhan Morden, head of Latin America fixed income strategy at Amherst Pierpont Securities, said in a client note. “The economic agenda remains subordinated to the political agenda with no clear framework on budgetary financing, no apparent commitment to fiscal discipline and a political agenda that remains a drag on investment and growth.” Thousands of Salvadorans marched on Wednesday to protest a perceived power grab by President Nayib Bukele, who is otherwise popular with the public. Bitcoin policy was also a target of the protest, and an ATM where the cryptocurrency can be exchanged for dollars was vandalized. The swift firing of judges on the constitutional panel of the Supreme Court in May and the recent court ruling that the president can serve two consecutive terms, opening the door for Bukele to stand for re-election in 2024, have soured his relationship with the United States. U.S. votes carry the largest weight for any decision regarding loans at the IMF. The potential for an IMF program for El Salvador is “under discussion,” Fund spokesman Gerry Rice said in a news briefing earlier on Thursday, adding that anti-corruption measures and fiscal responsibility are high on the agenda. The Fund did not immediately respond to a request for comment regarding S&P’s statement on risks to a potential deal.