200 years of sovereign haircuts
Christoph Trebesch, Assistant Professor, Department of Economics, University of Munich, and CEPR
How risky is sovereign debt? And under which circumstances do creditors suffer losses on their sovereign debt holdings? In his lecture based on a paper with Carmen Reinhart (Harvard) and Josefin Meyer (Sciences Po), Christoph Trebesch takes a long-run perspective on investor returns and investor losses (haircuts) in sovereign debt markets since 1815 and worldwide. The lecture will present new evidence on haircuts for more than 300 sovereign debt restructuring events, as well as long-run returns for a sample of more than 2500 sovereign debt instruments since 1815 (defaulted and non-defaulted ones). The evidence shows that the returns on sovereign bonds were surprisingly high, when compared to safe benchmark assets. Even bonds that went into default see a positive return overall, since the high coupons pre-default compensate for the losses ex-post. Despite the frequent defaults and haircuts, periphery sovereign bonds have been and continue to be an attractive asset class for investors.
The lecture will be held in English.