The hottest Sovereign debt Substack posts right now

In the past, many underestimated the threat from the People's Republic of China.
It is crucial to address the economic leverage that the PRC holds through legacy bonds.
There is an opportunity for the US to take a tough stance on the defaulted sovereign debt held by American bondholders.

Countries like Sri Lanka are facing serious debt problems, leading to protests and government instability. This could be a warning for other nations with similar financial issues.
Many countries, especially poorer ones, are struggling with rising debt due to high borrowing and the effects of global events like the war in Ukraine. This situation is getting worse and could lead to more defaults.
China's lending practices are a major factor in the growing debt crisis. Their loans often come with tough terms that many countries can't manage, causing additional economic troubles.

Country risk varies significantly between different nations. Countries with stable economies and strong political systems are generally safer for investments than those with instability or violence.
Corruption and legal protections are vital factors influencing country risk. High corruption levels can increase costs for businesses, while strong legal systems provide better support for contracts and property rights.
Recent global events, like the conflict in Ukraine, have raised risk levels across many countries. This has resulted in higher costs of capital for investors and increased equity risk premiums globally.

Many people wrongly assume that government bonds always have no risk, especially when they are in local currency. But countries can default on these bonds, making their interest rates not risk-free.
There is no single global risk-free rate; it varies with inflation across different countries. Mixing risk-free rates from different currencies can distort financial analyses.
Choosing the currency for valuation doesn’t change a company's inherent value, since risks and cash flows should align with the currency used.

The U.S. government isn't likely to default soon, but people's trust in its ability to manage debt has been shaken. Once investors start worrying about default, it's hard to restore that confidence.
The market is already reacting to fears of a U.S. default, with increased costs for protection against it. A formal downgrade from agencies may happen soon, but it will likely not come as a shock.
If there is a downgrade, the cost of borrowing for U.S. companies and risk-free rates will likely rise. This could lead to lower stock prices, although some changes in market prices may have already factored in this risk.

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Implicit guarantees for debt can be both helpful and risky. Greece's situation shows how these guarantees can support countries but also create big problems.
Being part of the EU has improved Greece's credit standing, but it has also led to a mix of benefits and challenges for stronger EU countries like Germany and France.
While a single currency makes business easier across Europe, it also introduces more regulations that can limit competitiveness against emerging markets like India and China.