Sovereign Bond Yield

Sovereign bonds are government bonds, like U.S. Treasury securities. People love ‘em, because they’re at least notionally practically risk-free.

International credit agencies, like Standard & Poor’s, rate how safe bonds are based on the country’s growth, history of default, per capita income, inflation, and other economic indicators.

But...low risk usually means low bond yields. A sovereign bond yield is the interest rate that a sovereign bondholder receives on the bond. From the government’s perspective, it’s the interest rate at which they’re borrowing money. When a government needs more revenue, they might sell more sovereign bonds. How to raise the demand for sovereign bonds? Raise the sovereign bond yield, i.e. sweeten the deal.

Even if you’re not interested in the risk-free sovereign bond game, you might still find the sovereign bond yield useful info. Investors often use the sovereign bond yield as a relative baseline for other bonds, like corporate bonds...the other type of bondage.