Sovereign Bonds

Sovereign bonds, otherwise known as government bonds, are bonds issued by national governments around the world with the main purpose of financing the operational needs of the government, and a tool to control the nation’s money supply. Similar to all other bonds, sovereign bonds pay out periodic coupons and a lump-sum at maturity. Most stable governments with a favourable financial position can offer bonds at a lower rate due to its low level of risks, such as the US government’s treasuries, which are deemed to be risk-free. In contrast, countries such as Brazil, has to offer at a premium to reflect its higher risk.