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Risks: Remove uncited statement, as an online search shows it to be incorrect
[td][/td] [td]===Credit risk===[/td]
[td]===Credit risk===[/td] [td]A government bond in a country's own currency is strictly speaking a [[risk-free bond]], because the government can if necessary [[Money creation|create additional currency]] in order to redeem the bond at [[Maturity (finance)|maturity]] <ref>{{cite journal |last1=Krugman |first1=Paul |title=Currency Regimes, Capital Flows, and Crises |journal=IMF Economic Review |date=1 November 2014 |volume=62 |issue=4 |pages=470β493 |doi=10.1057/imfer.2014.9}}</ref>. For most governments, this is possible only through the issue of new bonds, as the governments have no possibility to create currency (the issue of bonds which are then bought by the central bank with newly created currency in the process of "quantitative easing" may be regarded as de facto direct state financing from the central bank, which is outlawed officially for independent central banks).{{cn|date=August 2025}} There have been instances where a government has chosen to [[Default (finance)|default]] on its domestic currency debt rather than create additional currency, such as [[Russia]] in 1998 (the [[1998 Russian financial crisis|"ruble crisis"]]) .<ref>{{cite journal |last1=Kharas |first1=Homi J. |last2=Pinto |first2=Brian |last3=Ulatov |first3=Sergei |title=An Analysis of Russia's 1998 Meltdown: Fundamentals and Market Signals |journal=Brookings Papers on Economic Activity |date=2001 |volume=2001 |issue=1 |pages=1β68 |doi=10.1353/eca.2001.0012 |url=https://www.brookings.edu/articles/...998-meltdown-fundamentals-and-market-signals/}}</ref>[/td]
[td]A government bond in a country's own currency is strictly speaking a [[risk-free bond]], because the government can if necessary [[Money creation|create additional currency]] in order to redeem the bond at [[Maturity (finance)|maturity]] <ref>{{cite journal |last1=Krugman |first1=Paul |title=Currency Regimes, Capital Flows, and Crises |journal=IMF Economic Review |date=1 November 2014 |volume=62 |issue=4 |pages=470β493 |doi=10.1057/imfer.2014.9}}</ref>. There have been instances where a government has chosen to [[Default (finance)|default]] on its domestic currency debt rather than create additional currency, such as [[Russia]] in 1998 (the [[1998 Russian financial crisis|"ruble crisis"]]) .<ref>{{cite journal |last1=Kharas |first1=Homi J. |last2=Pinto |first2=Brian |last3=Ulatov |first3=Sergei |title=An Analysis of Russia's 1998 Meltdown: Fundamentals and Market Signals |journal=Brookings Papers on Economic Activity |date=2001 |volume=2001 |issue=1 |pages=1β68 |doi=10.1353/eca.2001.0012 |url=https://www.brookings.edu/articles/...998-meltdown-fundamentals-and-market-signals/}}</ref>[/td] [td][/td]
[td][/td] [td]Investors may use rating agencies to assess credit risk. In the United States, the [[U.S. Securities and Exchange Commission|Securities and Exchange Commission]] (SEC) has designated ten rating agencies as [[nationally recognized statistical rating organization]]s<ref>{{cite web |title=urrent NRSROs |url=https://www.sec.gov/about/divisions-offices/office-credit-ratings/current-nrsros |website=www.sec.gov |access-date=24 August 2025}}</ref>.[/td]
[td]Investors may use rating agencies to assess credit risk. In the United States, the [[U.S. Securities and Exchange Commission|Securities and Exchange Commission]] (SEC) has designated ten rating agencies as [[nationally recognized statistical rating organization]]s<ref>{{cite web |title=urrent NRSROs |url=https://www.sec.gov/about/divisions-offices/office-credit-ratings/current-nrsros |website=www.sec.gov |access-date=24 August 2025}}</ref>.[/td]
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[td][/td]Revision as of 11:24, 31 August 2025
[/td][td][/td] [td]===Credit risk===[/td]
[td]===Credit risk===[/td] [td]A government bond in a country's own currency is strictly speaking a [[risk-free bond]], because the government can if necessary [[Money creation|create additional currency]] in order to redeem the bond at [[Maturity (finance)|maturity]] <ref>{{cite journal |last1=Krugman |first1=Paul |title=Currency Regimes, Capital Flows, and Crises |journal=IMF Economic Review |date=1 November 2014 |volume=62 |issue=4 |pages=470β493 |doi=10.1057/imfer.2014.9}}</ref>. For most governments, this is possible only through the issue of new bonds, as the governments have no possibility to create currency (the issue of bonds which are then bought by the central bank with newly created currency in the process of "quantitative easing" may be regarded as de facto direct state financing from the central bank, which is outlawed officially for independent central banks).{{cn|date=August 2025}} There have been instances where a government has chosen to [[Default (finance)|default]] on its domestic currency debt rather than create additional currency, such as [[Russia]] in 1998 (the [[1998 Russian financial crisis|"ruble crisis"]]) .<ref>{{cite journal |last1=Kharas |first1=Homi J. |last2=Pinto |first2=Brian |last3=Ulatov |first3=Sergei |title=An Analysis of Russia's 1998 Meltdown: Fundamentals and Market Signals |journal=Brookings Papers on Economic Activity |date=2001 |volume=2001 |issue=1 |pages=1β68 |doi=10.1353/eca.2001.0012 |url=https://www.brookings.edu/articles/...998-meltdown-fundamentals-and-market-signals/}}</ref>[/td]
[td]A government bond in a country's own currency is strictly speaking a [[risk-free bond]], because the government can if necessary [[Money creation|create additional currency]] in order to redeem the bond at [[Maturity (finance)|maturity]] <ref>{{cite journal |last1=Krugman |first1=Paul |title=Currency Regimes, Capital Flows, and Crises |journal=IMF Economic Review |date=1 November 2014 |volume=62 |issue=4 |pages=470β493 |doi=10.1057/imfer.2014.9}}</ref>. There have been instances where a government has chosen to [[Default (finance)|default]] on its domestic currency debt rather than create additional currency, such as [[Russia]] in 1998 (the [[1998 Russian financial crisis|"ruble crisis"]]) .<ref>{{cite journal |last1=Kharas |first1=Homi J. |last2=Pinto |first2=Brian |last3=Ulatov |first3=Sergei |title=An Analysis of Russia's 1998 Meltdown: Fundamentals and Market Signals |journal=Brookings Papers on Economic Activity |date=2001 |volume=2001 |issue=1 |pages=1β68 |doi=10.1353/eca.2001.0012 |url=https://www.brookings.edu/articles/...998-meltdown-fundamentals-and-market-signals/}}</ref>[/td] [td][/td]
[td][/td] [td]Investors may use rating agencies to assess credit risk. In the United States, the [[U.S. Securities and Exchange Commission|Securities and Exchange Commission]] (SEC) has designated ten rating agencies as [[nationally recognized statistical rating organization]]s<ref>{{cite web |title=urrent NRSROs |url=https://www.sec.gov/about/divisions-offices/office-credit-ratings/current-nrsros |website=www.sec.gov |access-date=24 August 2025}}</ref>.[/td]
[td]Investors may use rating agencies to assess credit risk. In the United States, the [[U.S. Securities and Exchange Commission|Securities and Exchange Commission]] (SEC) has designated ten rating agencies as [[nationally recognized statistical rating organization]]s<ref>{{cite web |title=urrent NRSROs |url=https://www.sec.gov/about/divisions-offices/office-credit-ratings/current-nrsros |website=www.sec.gov |access-date=24 August 2025}}</ref>.[/td]
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