Sovereign bonds, Financial Management

There are two major factors to be considered while analyzing sovereign bonds. They are: economic risk and political risk. Economic risk is all about the ability and the willingness of the government to satisfy its obligation. Analysts have to perform both qualitative and quantitative tests to analyze economic risk.

The two ratings assigned to a national government are local currency debt rating and foreign currency debt rating. Historically, the default rate on foreign currency debt is higher compared to the local currency debt rating. For a local currency debt rating, the government depends on the taxes and the financial system of its country but with the latter, the government has to purchase foreign currency to meet its obligation. Any depreciation in local currency would affect the government's ability to meet its obligation.

Posted Date: 9/11/2012 1:13:39 AM | Location : United States







Related Discussions:- Sovereign bonds, Assignment Help, Ask Question on Sovereign bonds, Get Answer, Expert's Help, Sovereign bonds Discussions

Write discussion on Sovereign bonds
Your posts are moderated
Related Questions
Q. Evaluae new options within current organization? Evaluating having completed self marketing successfully to prospective employers it is time to analyze new options within cu

Cost of Preference capital (K ) The fixed rate of dividend payable to the Preference share holders is the cost of Preference capital.  Exactly, the cost of Preference capital

What are the social and contemporary issues in financial management?

A pharmaceutical company, named "XYZ", plans to deliver trials to three different clinics (C1, C2, and C3). The trials are used for the emergency treatments so XYZ must fulfill all

Define the P/E valuation method. Under what circumstances should a stock be valued using this method? The P/E ratio points out how much investor are willing to pay for each dol

QUESTION i) Discuss the risk associated with changes in exchange rates. ii) How can these risks be managed internally? iii) Explain how a manager can use a forward contra

Accounting and Financial Management 1. What is over capitalization? How do we know over capitalization has occurred? 2. Explain permanent and temporary working capital. 3

Municipal Securities are debt securities issued by a State, Municipality or a County in order to finance its capital expenditures. These securit

BSE-500 and Sectoral Indices On August 9, 1999, another new index was introduced in the market which was based on the data of 500 companies and designated as BSE-500 index. It

1. role financial intermediaries 2. nature and role of money markets