Who Holds Sovereign Debt and Why It Matters
This paper studies the impact of investor composition on the sovereign debt market. We construct a data set of sovereign debt holdings by foreign and domestic bank, non-bank private, and official investors for 101 countries across three decades. Private non-bank investors absorb disproportionately more debt supply than others. Moreover, non-bank investors’ demand for emerging market debt is most responsive to its price. Counterfactual analysis of emerging market sovereigns shows a 10% increase in debt leads to a 5.8% yield increase, but an out-sized 8.4% increase without non-bank investors. We conclude that sovereigns are vulnerable to the loss of non-bank investors.
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Copy CitationXiang Fang, Bryan Hardy, and Karen K. Lewis, "Who Holds Sovereign Debt and Why It Matters," NBER Working Paper 30087 (2022), https://doi.org/10.3386/w30087.Download Citation
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Non-Technical Summaries
- National governments that finance their activities by issuing debt must find someone to buy it. The interest rate they must pay to...
Published Versions
Xiang Fang & Bryan Hardy & Karen K Lewis & Ralph Koijen, 2025. "Who Holds Sovereign Debt and Why It Matters," The Review of Financial Studies, vol 38(8), pages 2326-2361.
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