The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Bond investors feel the pinch

Ambitious efforts are under way to bring order to sovereign debt work-outs. But private-sector lenders just don’t see what problem the IMF’s sovereign bankruptcy court is supposed to solve. Felix Salmon reports

Emerging-market bond investors are being caught in something of a pincer action. Impinging from one side is the IMF: hell-bent on destroying their contractual rights and making it easier for countries to default. Closing in on the other side are the countries they've been lending to, and the inevitability that they're going to default increasingly frequently. International bonds, in the wake of Ecuador and Argentina, no longer have an aura of inviolability, and rating agency Standard&Poor's says that sovereign bond defaults are going to rise steadily for the next decade.

More profoundly, bond investors have suddenly found themselves bereft of the power and influence they wielded throughout the 1990s. Back then they had no need of institutionalized creditors' trade associations: everybody kowtowed to them. Creditor countries would happily default to banks and other sovereigns long before contemplating defaulting on their bonds; the official sector looked at the huge private-sector capital flows going into the emerging markets and saw a future in which development was funded by the market and merely catalyzed by the Bretton Woods institutions.

Now, however, a vicious cycle has started. Crises cause capital flows to dry up; as capital flows dry up, bondholders become less important; as bondholders lose importance, they lose power and influence; and, without that leverage, bondholders are likely to continue to exit, further diminishing capital flows.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree