Sovereign Default


DEFINITION of 'Sovereign Default'

A failure on the repayment of a county's government debts. Countries are often hesitant to default on their debts, since it will be difficult and expensive to borrow funds after a default event. However, sovereign countries are not subject to normal bankruptcy laws and have the potential to escape responsibility for debts without legal consequences.


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BREAKING DOWN 'Sovereign Default'

Sovereign defaults are relatively rare, and are often precipitated by an economic crisis affecting the defaulting nation. Investors in sovereign debt closely study the financial status and political temperament of sovereign borrowers in order to determine the risk of sovereign default.

  1. Sovereign Credit Rating

    The credit rating of a country or sovereign entity. Sovereign ...
  2. Default

    1. The failure to promptly pay interest or principal when due. ...
  3. Sovereign Risk

    The risk that a foreign central bank will alter its foreign-exchange ...
  4. Default Premium

    The additional amount a borrower must pay to compensate the lender ...
  5. Sovereign Bond

    A debt security issued by a national government within a given ...
  6. Maturity

    The period of time for which a financial instrument remains outstanding. ...
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