High Yield Sovereign Bonds

High-yield sovereign bonds are issued by a State, which has credit ratings below investment level . The chance of total default on repayment of capital or suspension of interest is a rare newsworthy event. Countries will rarely default on their bonds due to the consequence of finding it extremely difficult to obtain any form of international finance or loans.

Usually if a Country defaults on its bonds due to economic reasons, it finds a way to repay those loans a few years later after implementing IMF imposed economic policies, for example Argentina.

Some countries, which default on bonds due to extreme politcal events such as the Soviet Union break-up rarely repay these bonds. These bonds trade on a private exchanges club at a few cents per USD 1 par. Upon default the Paris Club, an informal group of financial officials from 19 of the world's richest countries, meet to negotiate the defaulting country's debt restructuring, debt relief, and debt cancellation.

Sovereign bonds are volatile in nature due to economic or regional political events. When Argentina defaulted on its bonds in the 90's, most neighbouring Sovreign bonds also lost significant value.

High-yield sovereign bonds can chnage in value by 50% in a few days.