Sovereign Securitization in Emerging Markets

Abstract

Over many years, securitization has proven to be an expedient and highly flexible refinancing tool for corporates and public sector entities that seek a more accurate capital-market based valuation of asset performance. After successful securitization by public sector entities in advanced countries, also sovereigns in emerging economies are becoming adept at securitization as an efficient means of asset-liability management. The following article critically surveys the recent developments of sovereign securitization in emerging markets and informs a more specific debate about the attendant infrastructural, legal and regulatory challenges. Amid lower risk premia in a changing interest rate cycle, the current trend of greater investor differentiation in emerging markets creates a benign environment for sovereign securitization to accommodate continued institutional investor demand for highly rated debt.

Keywords: securitization, ABS, MBS, structured finance, asset liability management, sovereign securitization, future flow securitization

JEL Classification: D81, G15, M20