The speculative nature of a number of new bank loan and bond issuers is expected to see sovereign government defaults rising towards the end of the decade, a study has found.
Both the number of issuers and the amount of debt in default have been declining since the early 1990s, and this trend is set to continue throughout this year.
In 1995, the number of sovereign issuers in default fell to 36, down from 42 in the previous year, and a 10-year low. According to the study of the Standard & Poor's sovereign ratings group, default rates will start climbing again from next year, as the number of emerging market sovereigns of lesser credit quality that issue cross border debts continue to grow.
Since 1991, 40 per cent of Standard & Poor's new sovereign ratings have been below investment grade.
Sovereigns which have defaulted on foreign currency bonds over the past two decades include Argentina, Costa Rica, Yugoslavia and Zimbabwe, while a much larger number - estimated at 69 - defaulted on foreign currency bank debt during the period.
Defaults on local currency debt included Angola, Argentina, Brazil, Ghana, Burma and Russia, while Venezuela defaulted on part of its unrated local currency debt last year.
