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Are Sovereign Bonds Really Risk-Free?

October 3, 2016 : Permanent Link

(Daily Alts) Are Sovereign Bonds Really Risk-Free?The concept of a “risk free rate of return” has long been a staple of finance theory and investment practice. Since sovereign governments have abrogated the powers to tax and print money, it has been reasoned that their risk of default – at least among the governments of major, developed-market economies – has been zero. Thus, the “risk free rate” for any given maturity (overnight, three-month, thirty-year, etc.) has been the rate paid by government notes, bills, and bonds.

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