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I'm not sure exactly what you're asking, but there are probably an untold number of factors when analyzing risk on sovereign debt. Probably amongst the forefron
by hermitdev 8y ago
I'm not sure exactly what you're asking, but there are probably an untold number of factors when analyzing risk on sovereign debt. Probably amongst the forefront would be history of payment on bonds, currency stability, GDP, tax collection, and government stability.
For instance, I wouldnt buy an Argentine bond - they've failed to make bond payments to such an extent they had a warship seized as collateral in a foreign port. Likewise, Greece has had trouble making payments. GDP is poor, and tax evasion rates are high. To boot, because Greece is on the Euro, it cant even devalue its currency to lessen its debt burden.
- kmonsen 8y agoThis is why there are different rates for bonds, if you only want the safe ones the return will be small as well.
- hermitdev 8y agoOf course, this is not in question. It is very typical that bond yields are inversely correlated with risk. Higher the rating, lower yield. Lower rating, higher yield, but increased risk of default.