IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_12630.html

The State-Contingent Debt Premium: Evidence from French Public Bonds

Author

Listed:
  • Kris James Mitchener
  • Goncalo Pina

Abstract

State-contingent debt (SCD) instruments have been proposed as an improvement to sovereign debt markets, but their issuance costs are not well understood. We estimate the SCD premium at issuance and for more than a decade thereafter, employing a quasi-twin bond strategy that uses two very similar French government bonds issued in 1956: one conventional bond and one state-contingent bond with coupons linked to industrial production. At issuance, the expected yield on the SCD bond was 77 basis points higher than its twin. Due to robust growth in the French economy ex-post, the realized SCD premium at issuance was roughly twice as large (146 basis points). However, rising market prices of the state-contingent bond reduced both spreads to zero by 1964. They rose again in May 1968 following an unexpected general strike, which significantly reduced French industrial production; however, by 1970, the SCD premium had fallen to values close to zero.

Suggested Citation

  • Kris James Mitchener & Goncalo Pina, 2026. "The State-Contingent Debt Premium: Evidence from French Public Bonds," CESifo Working Paper Series 12630, CESifo.
    • Handle: RePEc:ces:ceswps:_12630
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp12630.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_12630. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.