Sovereign issuers

We have deleted the chapters on cubic spline (a technique now very well known and with plenty of material about it out there on the internet) and Brady bonds. We have also removed the earlier edition s chapters on risk-free sovereign bonds trading, oti the grounds that the logic of analysis employed for such investments has not changed since 2003, and also more indirectly because there are so few genuinely risk-free sovereign issuers left in the world ... 

The amount of data available for building emerging market spread factors is unfortunately scarce. First, there are often at best only a few bonds issued by sovereign issuers in emerging markets. The second problem is that there are mostly US dollar-denominated. Even when some bonds denominated in, say, euro are available, there is generally little returns history. In some cases, we will seek risk forecasts for an... 

A primary distinguishing feature of a bond is its issuer. The nature of the issuer will affect the way the bond is viewed in the market. There are four issuers of bonds sovereign governments and their agencies, local government authorities, supranational bodies such as the World Bank, and corporations. Within the corporate bond market there is a wide... 

Since the establishment of European Monetary Union on 1 January 1999, the word Eurobond has taken on an additional meaning— that of a euro-denominated security. In this chapter we generally use Eurobond both for issues that are in Eurobond format, and that are euro-denominated. There are, of course, markets for noneuro denominated corporate issues, chiefly in dollars and sterling. Noncorporate borrowers, such as sovereigns, supranationals, and agencies, are also big issuers of Eurobonds in all the major currencies. 

Top quality issuers have long been a part of Eurobond scene. But in euros, they have been eclipsed by the growth of the corporate market. Sovereign issuance in particular has fallen, as countries have shifted activity back to their domestic issuance mechanisms. This has mainly been done to increase liquidity and size in domestic market format, so as to compete better within the Eurozone. 

Most FRNs have been issued by sovereign-type entities and financial institutions. Industrial and utility activity has been relatively low, although it picked up somewhat in early 2002, as the extremely unstable market conditions made it difficult for issuers to sell fixed-rate securities (see Exhibit 6.18). 

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