Sovereign Bonds since Waterloo

Research

128 Pages

NBER studies foreign currency sovereign bonds as a long run asset class using a newly assembled price history stretching from 1815 to 2016. The work highlights how coupons, defaults, and restructurings shape realized outcomes in ways that look more equity-like than many investors expect. One surprising angle is how rarely full repudiation occurs across centuries of restructurings.

Date published: February 2019, revised January 2022

Key Takeaways

Sovereigns look equity like: Long run returns reflect meaningful risk taking, not a stable cash like profile.
Coupons drive outcomes: High coupons can offset defaults, making income central to the asset class story.
Defaults are not zero: Restructuring risk is persistent, so diversification and legal structure selection matter.

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