Knowing who invests in sovereign debt and how they impact borrowing costs could help governments understand how costly it would be to raise new debt. This article constructs and analyses data on the composition of the investor base for sovereign debt disaggregated into six types of investors for advanced economies and emerging markets. It finds that non-bank investors are most responsive to expansions and changes in the price of sovereign debt, suggesting that understanding their behaviour is crucial to ensure sovereign debt sustainability.
Sovereign borrowing can help buffer an economy from bad macroeconomic shocks. That indebtedness can also make a country vulnerable to financial distress. The sharp global increase in government…