Sovereign Bonds Since Waterloo

79 Pages Posted: 21 Feb 2019

See all articles by Josefin Meyer

Josefin Meyer

Ludwig Maximilian University of Munich (LMU)

Carmen Reinhart

Harvard University

Christoph Trebesch

Kiel Institute for the World Economy; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 4 versions of this paper

Date Written: 2019


This paper studies external sovereign bonds as an asset class. We compile a new database of 220,000 monthly prices of foreign-currency government bonds traded in London and New York between 1815 (the Battle of Waterloo) and 2016, covering 91 countries. Our main insight is that, as in equity markets, the returns on external sovereign bonds have been sufficiently high to compensate for risk. Real ex-post returns averaged 7% annually across two centuries, including default episodes, major wars, and global crises. This represents an excess return of around 4% above US or UK government bonds, which is comparable to stocks and outperforms corporate bonds. The observed returns are hard to reconcile with canonical theoretical models and with the degree of credit risk in this market, as measured by historical default and recovery rates. Based on our archive of more than 300 sovereign debt restructurings since 1815, we show that full repudiation is rare; the median haircut is below 50%.

Keywords: sovereign debt, default, risk premiums, investor returns, interest rates, portfolio, yields, coupons, recovery

JEL Classification: E400, F300, F400, G100, N000

Suggested Citation

Meyer, Josefin and Reinhart, Carmen and Trebesch, Christoph, Sovereign Bonds Since Waterloo (2019). CESifo Working Paper No. 7506, Available at SSRN:

Josefin Meyer (Contact Author)

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539

Carmen Reinhart

Harvard University ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Christoph Trebesch

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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