Sovereign Debt Management Introduction
International financial markets assign the status of "sovereign debt" to the public debt issued by governments. This status
reflects the highest quality debt issuers in the market, and most with the strongest credit rating. Domestic public debt has a very significant and unique role as a high credit quality investment with
normally a high degree of liquidity, best illustrated by the US Treasury market. As a result of this status, sovereign borrowers are expected to have a risk
management culture, which fully reflects the government's risk preferences and the special set of responsibilities associated with representing the government in the international financial markets.
These responsibilities are considerable, particularly if the government's reputation in international financial markets is to be maintained at the highest level.Many countries have clear and
orthodox objectives for monetary policy, normally based on annual inflation targets. On the other hand, government objectives for sovereign debt management are often not well specified in terms of cost
and risk. In many countries, debt management policy is undertaken with a limited understanding of the government's risk preferences and its tolerance to risk. Over the past 20 years,
governments particularly in the OECD countries have recognised this shortcoming and taken measures to address this by establishing an autonomous debt management office or agency with the sole responsibility
for public debt management. International Debt Management Practices
The article "Sovereign Debt Management: A Risk Management Focus" published "The Finance and Treasury Professional" details public debt management practice. The article covers:
An introduction to sovereign debt management The importance of debt management Risk management Sovereign debt management within an ALM framework International sovereign debt management practices
This paper is available in PDF format. To download click  To download a free PDF file reader click  |
