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Strategic Considerations for First-Time Sovereign Bond Issuers

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  • Magdalena Polan
  • Udaibir S. Das
  • Michael G. Papaioannou
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    Abstract

    The recent round of debt relief has restored debt sustainability in many low-income countries (LICs). This, along with a continued search for yield and desire for portfolio diversification by investors, has increased the range of viable financing options, including international bonds, for many emerging market (EM) economies and LICs. This paper presents some of the advantages and disadvantages of international debut bonds, within a debt sustainability framework. It outlines key preconditions and discusses strategic considerations that countries need to take into account when contemplating bond issuance in international markets for the first time. In this context, the paper also discusses some typical pitfalls in accessing international capital markets, including excessive issue size relative to the intended use of bond proceeds, issuance of bullet bonds, and inadequate preparation for accessing the markets.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/261.

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    Length: 27
    Date of creation: 01 Nov 2008
    Date of revision:
    Handle: RePEc:imf:imfwpa:08/261

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    Keywords: Sovereign debt; External debt; Emerging markets; Debt relief; Debt sustainability; Low-income developing countries; bond; bonds; international bond; bond issue; international capital; international capital markets; sovereign bond; debt management; international bond issue; bond issuance; bond issues; currency of denomination; bondholders; external borrowing; debt service; international bonds; bond issuers; debt service payments; domestic currency; currency risk; currency mismatch; public debt; access to international capital; sovereign bonds; bullet bond; global bonds; government debt; global bond; debt crises; eurobond; bond proceeds; currency composition; individual bondholders; international financial markets; external debt financing; debt strategy; financial stability; debt management strategy; bond spreads; bond spread; domestic capital markets; domestic capital; bond index; domestic savings; domestic debt; public external debt; outstanding bonds; financial institutions; financial markets; debt servicing; debt structure; principal repayments; debt management systems; bilateral creditors; current account; principal repayment; debt relief packages; debt ratios; corporate bonds; bond issuing process; commercial borrowing; currency mismatches; domestic bonds; debt portfolio; substantial debt; government bonds; local debt; debt management practices; callable bonds; bond investors; debt burden; private sector borrowers; debt management operations; dollar bond; currency risks; bond contract; substantial debt relief; sovereign debt crises; domestic saving; financial globalization; eurobonds; international reserves; bond issuing; net present value; debt management offices; privately placed; benchmark bond; external debt servicing; debt management capacity; crowding out; debt intolerance; public debt management; external financing; present value; brady bonds; debt market; repayments; debt exchanges; bond indices; debt thresholds; bond contracts; relief packages; medium-term debt sustainability; current account deficit; global liquidity;

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Pierre-Richard Ag├łnor, 2003. "Benefits and Costs of International Financial Integration: Theory and Facts," The World Economy, Wiley Blackwell, vol. 26(8), pages 1089-1118, 08.
    2. Robert F. Dittmar, 2008. "Do Sovereign Bonds Benefit Corporate Bonds in Emerging Markets?," Review of Financial Studies, Society for Financial Studies, vol. 21(5), pages 1983-2014, September.
    3. Michael Kremer & Seema Jayachandran, 2002. "Odious Debt," NBER Working Papers 8953, National Bureau of Economic Research, Inc.
    4. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2003. "Debt Intolerance," NBER Working Papers 9908, National Bureau of Economic Research, Inc.
      • Reinhart, Carmen & Rogoff, Kenneth & Savastano, Miguel, 2003. "Debt intolerance," MPRA Paper 13932, University Library of Munich, Germany.
    5. Mauro, Paolo & Sussman, Nathan & Yafeh, Yishay, 2007. "Emerging Markets and Financial Globalization: Sovereign Bond Spreads in 1870-1913 and Today," OUP Catalogue, Oxford University Press, number 9780199226139, September.
    6. Axel Schimmelpfennig & Nouriel Roubini & Paolo Manasse, 2003. "Predicting Sovereign Debt Crises," IMF Working Papers 03/221, International Monetary Fund.
    7. David A. Grigorian, 2003. "On the Determinants of First-Time Sovereign Bond Issues," IMF Working Papers 03/184, International Monetary Fund.
    8. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
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