Investment Office Logo

Who holds sovereign debt and why it matters

BIS Working Papers No 1099

Monetary and Economic Department

Xiang Fang, Bryan Hardy, Karen K. Lewis
BIS, May 2023


This paper studies the impact of investor composition on the sovereign debt market. We construct a data set of sovereign debt holdings by foreign and domestic bank, non-bank private, and official investors for 95 countries over 20 years. Private non-bank investors absorb disproportionately more sovereign debt supply than other investors. Moreover, non-bank investor demand is most responsive to the yield. Counterfactual analysis of emerging market sovereigns shows a 10% increase in debt leads to a 6.7% increase in costs, but an outsize 9% increase if non-bank investors are absent. We conclude that these sovereigns are vulnerable to losing non-bank investors.


The full publications are available on the BIS website free of charge: