A Primer on Managing Sovereign Debt-Portfolio Risks
IMF Working Papers, April 6, 2018
Source details
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- A Primer on Managing Sovereign Debt-Portfolio Risks
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Bibliographic details
- Authors: Thordur Jonasson, Michael G. Papaioannou
- Published: April 6, 2018
- Series: IMF Working Papers
Overview
- Provides an overview of sovereign debt portfolio risks and discusses various liability management operations (LMOs) and instruments used by public debt managers to mitigate these risks.
- Analyzes debt management strategies in the context of reaching debt portfolio targets and attaining desired portfolio structures.
- Outlines how LMOs could be integrated into a debt management strategy and serve as policy tools to reduce potential debt portfolio vulnerabilities.
- Presents operational issues faced by debt managers, including the need to develop a risk management framework, and the interactions of debt management with fiscal policy, monetary policy, and financial stability, as well as efficient government bond markets.
Key findings and analytical themes
- Sovereign debt portfolio risks: Identification and overview of risks inherent in public debt portfolios.
- Liability Management Operations (LMOs): Discussion of various LMOs and instruments used to mitigate portfolio risks.
- Strategy alignment: Debt management strategies are analyzed for their role in helping reach debt portfolio targets and attain desired portfolio structures.
- Policy tool role: LMOs can be integrated into debt management strategies to act as policy tools to reduce potential debt portfolio vulnerabilities.
- Operational challenges: Emphasis on the need for a risk management framework and on interactions with fiscal policy, monetary policy, financial stability, and the development of efficient government bond markets.
Policy recommendations and operational implications
- Integrate LMOs into broader debt management strategies to actively reduce portfolio vulnerabilities.
- Develop and maintain a formal risk management framework for public debt management.
- Coordinate debt management closely with fiscal policy and monetary policy to mitigate unintended interactions.
- Support the development of efficient government bond markets to improve debt management outcomes.
Subject coverage and keywords
- Subjects: Asset and liability management, Bonds, Credit risk, Debt management, Financial institutions, Financial regulation and supervision, Government debt management, Public debt, Public financial management (PFM).
- Keywords: bond issue, Bonds, borrowing cost, Credit risk, Debt management, debt manager, debt portfolio, exchange rate risk, Financial Risk, foreign currency, Foreign Exchange Hedging, Global, Government debt management, Government Securities Markets, interest rate, portfolio risk, Public Debt Management, short-term debt, WP.
Content in this bundle
- A Primer on Managing Sovereign Debt-Portfolio Risks, WP/18/74, April 2018