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Why are Sovereign Bond contracts sticky?

This paper investigates the causes of “stickiness” in sovereign debt contract terms that can facilitate sovereign debt crisis management. As part of the project, authors interviewed representatives of high-income and emerging market debt management offices and buy-side investment firms. Contrary to the prevailing view of debt managers and much of the sovereign debt literature, their findings suggest that near-term borrowing costs may not be the main driver of government debt managers’ resistance to contract change. Both debt managers and investors said that they had never negotiated the price of non-financial terms. Most significantly, they insisted that their reluctance to change contracts had little to do with the substance of any given term, but instead reflected a generalized desire to adhere to “standard” non-financial terms as closely as possible, apparently regardless of what that market standard entailed.