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Bonds and Debt

In: Fixed Income Investing

Author

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  • Thomas Poufinas

    (Democritus University of Thrace)

Abstract

The previous two chapters revealed two things; first that bondsbonds and debt can generate risks and second that bonds are affected by crisescrises and the reaction of the central bankscentral bank(s) as far as their pricingpricing is concerned. Pricing is expressed not only in monetary terms but also in terms of yield to maturityyield to maturity (YTM), which is practically equivalent and more indicative of the cost to the issuerissuer(s). Bonds are the most common vehicle through which governments can receive financing – except when they cannot address the market and they have to rely to other mechanisms or organizations. The overall debt of the government (compared to GDP) is important for the serviceability of the outstanding bond amount. What is also important is who holds the debt, as well as its maturity structure. In this chapter we try to investigate the link between bond issuance and debt, mostly public debt. One natural question that rises is whether the bond issuance is indeed related to the fiscal needs. Another is what should be the government yield curve that will allow the repayment of the debt. And one more; is there an optimal amount of bonds that can be issued so that the debt of a country is sustainable in the long run, with the information we have today? This chapter helps the reader understand whether the mix of bonds issued and the sovereign debt are linked.

Suggested Citation

  • Thomas Poufinas, 2022. "Bonds and Debt," Springer Books, in: Fixed Income Investing, chapter 0, pages 557-569, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-87922-8_11
    DOI: 10.1007/978-3-030-87922-8_11
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