Are Bad Government a Threat to Sovereign Defaults? New Findings Using the ICRG
“There are questions around the stability of government functioning, uncertainty around the shape of the federal bureaucracy, and then ultimately questions increasingly around the rule of law and predictability.”
Referring to the US, this quote came from Ronald Temple, the chief market strategist for Lazard’s financial advisory and asset management businesses.
Today the US Treasury is auctioning $39 billion in 10-year securities and yields are rising as investors are wary over of what has been perceived as the world’s safest instrument, given expectations of weaker foreign demand as tariffs take effect.
Our ICRG rating on the US is the lowest (higher risk) since July 2024, yet for reasons not entirely evident from the press reports,
“ICRG is a…statistically significant determinant of sovereign bond yields and growth…”
‘Are Bad Government a Threat to Sovereign Defaults? The Effects of Political Risk on Debt Sustainability,’ S Ajovalasit, et al., Working Paper 01/2025, Bruegel
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