Sovereign Debt (Sov Debt) means any debt government has guaranteed. This not only include the debts/obligations/securities but also obligations by any of its department/ministries. Nearly all governments require a constant flow of borrowed funds in order to pursue their policies. Even in developed economies, successive budget deficits build up a large stock of outstanding debt that must be refinanced or serviced. Although some countries reduce borrowing during periods of budget surpluses, they never stop borrowing completely. In countries such as the US where there is a deep domestic bond market, government bonds represent a risk-less benchmark.
|Country||Bond Name||ISIN Country Prefix|
|Italy||BTPs (Buoni del Tesoro Poliennali)||IT|
|France||OATs (Obligations Assimilables du Trésor)||FR|
Common government bonds and their issuers.
Local Govt entities Municipals , Government Sponsored Enterprise GSE
(Muni) market in US is of considerable size. In the US again, there is a large quasi-government agency bond market sector for the securities of federal government agencies and government-sponsored enterprises (GSEs). While some of these agencies are explicitly government guaranteed, others are ostensibly private corporations. Due to their importance, there is a general assumption by the market that their borrowings have implicit government support.
The implicit US government guarantee for agency securities was put to the test at the height of the financial crisis in September 2008. The government was forced to bail out and put into conservatorship two GSEs the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) in. As conservator, the US government or more specifically the Federal Housing Finance Agency (FHFA), which regulates the country’s secondary mortgage markets assumed ultimate control over Fannie Mae and Freddie Mac.
Corporation ( Bank, nonbanks)
includes corporate borrowers (such as retail, IT, and industrial firms) and financial borrowers (notably banks).
In fact, financial sector issues account for the majority of volume in the corporate sector.
Wholesale debt issuance can be a key part of a bankâ€™s business model.
A bank’s funding structure may be based on customer deposits, but it will generally look to supplement this with a portion of long-term funding through bond market issues.
international organisations, often multinational or quasi-government organisations, usually owned by consortium of sovereigns.
Bond issuance is often the primary source of funding for these entities, so they represent an important component of many international and domestic bond markets
The most prominent supranational borrowers are multilateral development banks (MDBs) that borrow in the capital markets in order to lend to infrastructure projects.
MDBs operate both regionally and globally. Examples of regional MDBs include the following:
European Investment Bank (EIB)
European Bank for Reconstruction and Development (EBRD)
Asian Development Bank (ADB)
African Development Bank (AfDB)
Inter-American Development Bank (IDB)
A Special Purpose Vehicle Company is a company that has been established by another trading company or private individual(s) for the sole purpose of BTL activities i.e. the purchase/remortgage of residential properties for letting.
Securitization is a structured process where interests in financial assets â€“ such as mortgages, loans, or other receivables â€“ are packaged, underwritten, and sold in the form of asset-backed securities (ABS).
For this purpose a shell entity is created, this entity has no assets other than the pool or liabilities apart from the ABS
MBS is part of this.