Conduct of the Sovereign

 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.

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