Who Holds Sovereign Debt and Why It Matters

73 Pages Posted: 1 Jun 2022 Last revised: 24 Apr 2023

See all articles by Xiang Fang

Xiang Fang

The University of Hong Kong

Bryan Hardy

Bank for International Settlements (BIS) - Monetary and Economic Department

Karen K. Lewis

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: April 22, 2023

Abstract

This paper studies the impact of investor composition on the sovereign debt market. We construct an aggregate data set of sovereign debt holdings by foreign and domestic bank, non-bank private, and official investors for 95 countries over twenty years. We find that private non-bank investors absorb most of the increase in sovereign debt supply. We further find that foreign non-bank investor demand is most responsive to the yield for emerging market (EM) debt, while yield elasticity for all investors is much lower for advanced economy debt. We show that EM sovereigns are highly vulnerable to losing their foreign non-bank investors.

Keywords: Sovereign debt, Banks and Non-banks, Advanced Economies and Emerging Markets

JEL Classification: F34, G11, G15, F41

Suggested Citation

Fang, Xiang and Hardy, Bryan and Lewis, Karen Kay, Who Holds Sovereign Debt and Why It Matters (April 22, 2023). Available at SSRN: https://ssrn.com/abstract=4114081 or http://dx.doi.org/10.2139/ssrn.4114081

Xiang Fang (Contact Author)

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

Bryan Hardy

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Karen Kay Lewis

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-7637 (Phone)
215-898-6200 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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