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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.

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 Debt

    Bonds issued by a national government in a foreign currency, ...
  2. Default

    Default is the failure to promptly pay interest or principal ...
  3. Sovereign Risk

    Sovereign risk is the risk that a central bank will impose foreign ...
  4. Sovereign Bond Yield

    Sovereign bond yield is the interest rate paid on a government ...
  5. Default Premium

    The additional amount a borrower must pay to compensate the lender ...
  6. Strategic Default

    A deliberate default by a borrower. As the name implies, a strategic ...
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