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
What is GATT, and what is its goal? GATT is also termed as General Agreement on Tariffs and Trade.  It is a treaty which seeks to decrease trade barriers among participant nation

a) Marketing might be vital to an organisation such as WHSG for several reasons, including: • The need to be a focus for the right kind of students to the school (there are riva

This case has been framed in order to test the skills in evaluating a credit request and reaching a correct decision. Perluence International is large manufacturer of petroleum and

London Stock Exchange (LSE) The origin of the London Stock Exchange goes back to the coffee houses of 17th century. London, where people willing to invest or raise money, bough

We have seen computation of present value using single discount rate. But the right way to value a cash flow of a bond is to use multiple discount rates, i.e valuing th

Assembling the Divestiture Team: Divestment of a business requires a team of functional experts under the direction of an experienced project manager. The first and foremost ac

Commercial Paper (CP) is a short-term unsecured promissory note issued in the open market. It also represents the obligation of the issuer. Normally, it is issued

A division of Saron plc is considering introducing a new product.  The product is the result of work undertaken by the division's research and development department - the expendit

1. List five different types of resource that a company might consider hiring or leasing. Explain why the might choose these option instead of outright purchase 2. List three di

Suppose the government regulates the price of a good to be no lower than some minimum level. Can such a minimum price make producers as a whole worse off?  Explain. As a higher