Understanding the Evolution of Bond Markets

How do Investors in Sovereign Bonds Fare? Josefin Meyer (Kiel Institute for the World Economy) is one of the young stars of the sovereign debt world. Her recent paper with Carmen Reinhart and Christoph Trebesch looks at how investors in sovereign debt fared from Waterloo to the present day (up to 2016, anyway). The paper is astonishing in scope and finds that the returns to investors in sovereign debt--notwithstanding the many (often serial) defaults and restructurings--are significantly greater than what would be predicted by standard finance models. What is driving these excess returns? Should we all be rushing out to buy Lebanese and Argentine bonds? We ask Josefin these and other questions, including what to think of current Covid-era sovereign bond yields (e.g., negative yields at present for Greece). Producer: Leanna Doty