A country’s economic sustainability could
serve as a much better barometer of future economic performance as
traditional credit ratings have reached their limits and no longer
serve as leading indicators, research from Bank Sarasin has

The sovereign bonds of many Southern European
countries have seen prices collapse under the pressure of the
European debt crisis.

Sarasin said the “traditional” credit ratings
of the big agencies were repeatedly cut, virtually in parallel,
with the decline in the sovereign bonds’ value, acting more as a
barometer of current trends, than an indicator for the future.

The research suggests that investors in
sovereign bonds should look at economic sustainability, including
factors such as future tax receipts and efficiency of converting
goods and services into earnings, when assessing the returns from
sovereign debt.


Divergence noted from

How well do you really know your competitors?

Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.

Company Profile – free sample

Thank you!

Your download email will arrive shortly

Not ready to buy yet? Download a free sample

We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form

By GlobalData
Visit our Privacy Policy for more information about our services, how we may use, process and share your personal data, including information of your rights in respect of your personal data and how you can unsubscribe from future marketing communications. Our services are intended for corporate subscribers and you warrant that the email address submitted is your corporate email address.

In its research, Bank Sarasin split the World
Government Bond Index (WGBI) produced by Citigroup into two

Fifteen of the total 25 countries represented
in the index were classed as “sustainable” according to Sarasin’s
rating system, while the rest were classed as

“One conspicuous feature is the way that the
two groups started to move apart from about mid-2009 onwards, which
is attributable to a combination of losses in local currency terms
and negative exchange rate movements”, the report said.

Sarasin’s study also revealed that sovereign
bonds of sustainable emerging economies have comfortably
outperformed their non-sustainable counterparts.