This paper analyzes the determinants and effects of credit default swap trading initiation on sovereign bonds in 54 countries, focusing on market completeness, price efficiency and borrowing costs. We find that CDS initiation enhances market completeness for the majority of countries in our sample. For high default risk and low financial market openness countries, CDS initiation provides significant price efficiency benefits in the underlying market. CDS initiation also reduces risk premiums to investment-grade sovereigns while increasing borrowing costs for sub-investment-grade economies. CDS trading initiation is more likely following increases in local stock index volatility and the volatility risk premium and decreases in foreign currency reserves and the local currency exchange rate with the USD