The secondary market is sensitive to the sovereign’s own conduct.
Actions to raise the value of one’s paper:
- a sovereign can institute a debt/equity conversion programme (this could add a value to the secondary market price of one’s paper).
Actions or events to diminish the price of one’s paper:
- promulgation of a moratorium on interest payments;
- suffer a major earthquake, drought or typhoon and the price will come down;
A sovereign could influence the market and could have its benefits in the form of increasing secondary market discounts.
The money for a buyback was the money that would otherwise be allocated to pay interest on the very debt that was targeted for repurchase.