Sovereign debt

Government bonds usually issued in the national currency to raise funds to finance a country’s growth or spending. These have different maturity dates and can offer nominal or real interest rates. The debt is given a credit rating to indicate the likelihood that the principal will be repaid in full and interest payments made on time. Sovereign debt from developed countries is considered a relatively safe investment as the government can always raise taxes or print money to pay off its creditors. However, those from developing countries are higher risk and therefore pay higher rates of interest.

This definition is for general information purposes only