Series 65: 2.14.2. Sovereign Bonds

2.14.2. Sovereign Bonds

Sovereign bonds are bonds issued by foreign governments. They are called “sovereign” bonds because they are issued by entities (countries) that have “sovereign” or paramount power. Sovereign bonds tend to be less risky than other types of foreign bonds because governments can raise taxes or lower spending to make their interest payments. That said, certain government debt is considered more risky and therefore pays higher coupon rates than other government debt. Politically stable governments typically issue debt securities with lower coupon rates than less sta