Bangladesh Bank Training Academy Journal

Abstract

In recent years, a number of low and middle income countries issued Eurobonds to ease their financing constraints. Low returns on investments in advanced industrialized economies and excess global liquidity encouraged global investment banks to create new markets for high-yield sovereign bonds from low and middle income countries. While sovereign bonds enable the governments of these countries to raise large sums of foreign capital at relative ease, terms and maturity structures of these debt instruments seldom compare favorably with concessional loans these countries receive from multilateral and bilateral development partners. The paper reviewing 31 sovereign bond issues from 17 low and middle income countries during 2006-2013-identifies the key macro and microeconomic determinants of the borrowing costs of sovereign bonds, explains the risks of entering the international capital market and recommends a set of policy options and strategies for the Government of Bangladesh, as it considers to issue a sovereign bond in 2013.