NationMaster - Encyclopedia: Sovereign bond

A sovereign bond is a bond issued by a national government. Bonds issued by national governments in the country's own currency are also referred as government bonds. In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon) at a later date, termed maturity. ... A government bond is a bond issued by a national government denominated in the countrys own currency. ...

Nations with very high or unpredictable inflation or with unstable exchange rates often find it uneconomic to issue bonds in their own currencies and so are forced to issue bonds denominated in more stable foreign currencies. This raises the issue of default if the nation cannot afford to repurchase the necessary foreign currency at bond repayment time. Due to the risk of default, investors require the bonds to be issued with a higher yield. This makes the debt more expensive to service, increasing risk of default. In the event of default, unlike a corporation or even a municipal subdivision, a nation cannot file for bankruptcy. But on the rare occasions that a default occurs, just as in defaults on corporate bonds, recent practice has been that the defaulting borrower presents an exchange offer to its bond holders in an effort to restructure the sovereign debt, as has been the case in US dollar denominated bonds issued by Peru (1996) and Argentina (2001). However, getting the bond holders to accept an exchange offer has become very difficult, something caused by the holdout problem. One of the most influential doctrines in history is that all humans are divided into groups called nations. ... In finance, default occurs when a debtor has not met its legal obligations according to the debt contract, e. ... In financial economics, the yield of a financial instrument/security (finance), usually a debt instrument, or other investment is the rate of return the holder earns on that instrument. ... Corporate redirects here. ... Notice of closure stuck on the door of a computer store the day after its parent company, Granville Technology Group Ltd, declared bankruptcy (strictly, put into administrationâ€”see text) in the United Kingdom. ... A Corporate bond is a bond issued by a corporation, as the name suggests. ... The United States dollar is the official currency of the United States. ... Year 1996 (MCMXCVI) was a leap year starting on Monday (link will display full 1996 Gregorian calendar). ... Year 2001 (MMI) was a common year starting on Monday (link displays the 2001 Gregorian calendar). ... When a government offers an exchange offer, in an effort to restructure its sovereign debt, some bond holders may reject it. ...

During the early 1980s, the sovereign bonds of developing nations were a popular investment for Western banks. These created many problems when some nations found it difficult to repay those bonds.

See also

Tax rates around the world Tax revenue as % of GDP Economic policy Monetary policy Central bank Money supply Fiscal policy Spending Deficit Debt Trade policy Tariff Trade agreement Finance Financial market Financial market participants Corporate Personal Public Banking Regulation Government debt (also known as public debt or national debt) is... Emerging Market Debt (EMD) is a term used to encompass bonds issued by less developed countries. ... Brady Bonds are Dollar, denominated bonds, named after U.S. Treasury Secretary Nicholas Brady, mostly for emerging markets debt. ...

Category: Bonds The bond market, also known as the debit, credit, or fixed income market, is a financial market where participants buy and sell debt securities usually in the form of bonds. ... This article does not cite any references or sources. ... In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and interest (the coupon) at a later date, termed maturity. ... In finance, a debenture is a long-term debt instrument used by governments and large companies to obtain funds. ... A government bond is a bond issued by a national government denominated in the countrys own currency. ... Agency debt (sometimes referred to in plural as Agencies) is a type of bond issued by a corporation that is nominally independent of the government - though ownership may be public or private - but considered to be backed by the government, usually on a de facto basis. ... In the United States, a municipal bond or muni is a bond issued by a state, city or other local government, or their agencies. ... A Corporate bond is a bond issued by a corporation, as the name suggests. ... Emerging Market Debt (EMD) is a term used to encompass bonds issued by less developed countries. ... In finance, a Fixed rate bond is a security issued by a government or a business corporation that pays a fixed amount of interest (coupon rate) on the face value (principal/par value) of the bond periodically (often every six months or annually) to the owner until a date certain... Floating rate notes (FRNs) are bonds that have a variable coupon, equal to a money market reference rate, like LIBOR or federal funds rate, plus a spread. ... Zero coupon bonds are bonds which do not pay periodic coupons, or so-called interest payments. ... Inflation-indexed bonds (also known as linkers) are bonds whose principal are indexed to inflation, cutting out inflation risk. ... Commercial paper is a money market security issued by large banks and corporations. ... An accrual bond is a fixed-interest bond that is issued at its face value and repaid at the end of the maturity period together with the accrued interest. ... An auction rate security (ARS) typically refers to a debt instrument (corporate or municipal bonds) with a long-term nominal maturity for which the interest rate is reset through a dutch auction. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... A convertible bond is type of bond that can be converted into shares of stock in the issuing company, usually at some pre-announced ratio. ... A mortgage-backed security (MBS) is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans. ... An asset-backed security is a type of bond or note that is based on pools of assets, or collateralized by the cash flows from a specified pool of underlying assets. ... A bond option is similar to a stock option with the difference that the underlying asset is a bond. ... A credit derivative is a contract (derivative) to transfer the risk of the total return on a credit asset falling below an agreed level, without transfer of the underlying asset. ... A credit default swap (CDS) is a bilateral contract under which two counterparties agree to isolate and separately trade the credit risk of (at least one) third party entity. ... Collateralized debt obligations (CDOs) are a type of asset-backed security or structured finance product. ... A Collateralized Mortgage Obligation (CMO) is a type of Mortgage Backed Security, which has been divided up into tranches. ... Bond valuation is the process of determining the fair price of a bond. ... Par value has several meanings depending on the context, whether used in the equities market, or in the bond markets, and partially also dependent on where in the world the par value term is used. ... In finance, coupons are attached to bonds, either physically, as with old bonds (with a stapler), or electronically. ... The price quoted for a bond excluding accrued interest. ... Dirty Price A bond price that includes accrued interest. ... In finance, accrued interest is the interest that has accumulated since the principal investment, or since the previous interest payment if there has been one already. ... It has been suggested that Interest rate basis be merged into this article or section. ... Nominal yield is the income received from a fixed income security in one year divided by its par value. ... This article or section does not cite its references or sources. ... Yield to maturity (YTM) is the yield promised by the bondholder on the assumption that the bond will be held to maturity, that all coupon and principal payments will be made and coupon payments are reinvested at the bonds promised yield at the same rate as invested. ... The US dollar yield curve as of 9 February 2005. ... In economics and finance, duration is the weighted average maturity of a bonds cash flows or of any series of linked cash flows. ... This article does not cite any references or sources. ... Credit analysis is the method by which one calculates the creditworthiness of a company according to the numbers made available by the audited financials for the financial year. ... Credit risk is the risk of loss due to a debtors non-payment of a loan or other line of credit (either the principal or interest (coupon) or both). ... In finance the Yield spread is the difference between the quoted rates of return on two different investments; a way of comparing any two financial products. ... Credit spread is the difference in yield between different securities due to different credit quality. ... Option adjusted spread (OAS) is the flat spread over the treasury yield curve required to discount a mortgage-backed securitys volatile coupon payments to match its market price. ... In the context of interest rate derivatives, a short rate model is a mathematical model that describes the future evolution of interest rates by describing the future evolution of the short rate. ... The Rendleman-Bartter model in finance is a short rate model describing the evolution of interest ratess. ... In finance, the Vasicek model is a mathematical model describing the evolution of interest rates. ... In financial mathematics, the Ho-Lee model is a Short rate model of future interest rates. ... In financial mathematics, the Hull-White model is a model of future interest rates. ... The Cox-Ingersoll-Ross model in finance is a mathematical model describing the evolution of interest rates. ... [edit] The model The first stochastic mean and stochastic volatility model was described by Lin Chen in 1996. ... Heath-Jarrow-Morton framework is a general framework to model the evolution of interest rates (forward rates in particular). ... Black-Derman-Toy, or BDT, in finance, is a model of the evolution of the yield curve, sometimes referred to as an short rate model. ...