Sovereign Default

AAA

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.

INVESTOPEDIA EXPLAINS '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.

VIDEO

RELATED TERMS
  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. Treasury Direct

    The online market where investors can purchase federal government ...
Related Articles
  1. Sovereign Debt Overview
    Economics

    Sovereign Debt Overview

  2. How Countries Deal With Debt
    Credit & Loans

    How Countries Deal With Debt

  3. Six Biggest Bond Risks
    Bonds & Fixed Income

    Six Biggest Bond Risks

  4. Find The Right Bond At The Right Time
    Bonds & Fixed Income

    Find The Right Bond At The Right Time

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center