Who Holds Sovereign Debt and Why It Matters

Xiang Fang, Bryan Hardy and Karen Lewis

No 17338, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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 95 countries over twenty years. Private non-bank investors absorb disproportionately more sovereign debt supply than other investors. Moreover, non-bank investor demand is most responsive to the yield. Counterfactual analysis of emerging market sovereigns shows a 10\% increase in debt leads to a 6.7\% increase in costs, but an out-sized 9\% increase if non-bank investors are absent. We conclude that these sovereigns are vulnerable to losing non-bank investors.

Keywords: Sovereign debt; Investor demand; Banks and non-banks; Advanced economies and emerging markets (search for similar items in EconPapers)
JEL-codes: F34 F41 G11 G15 (search for similar items in EconPapers)
Date: 2022-05
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Related works:
Working Paper: Who holds sovereign debt and why it matters (2023)
Working Paper: Who Holds Sovereign Debt and Why It Matters (2022)
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