Considerations and implications of issuing sovereign bonds: the case of Mongolia

Abstract: The following paper aims to assess Mongolia’s recent decision to engage in its first issue of sovereign bonds, announced for the fall of 2010. To this end, both a qualitative and a quantitative analysis of the bond characteristics and implications were conducted. The comparative country analysis provides insight into previous activities on the sovereign bond market, and helps estimate the expected maturity, coupon rate and denomination of the bond. As regards the debt size, a model is developed based on historical data, and then used as framework for the forecast of future country indebtedness. In the end, taking into account all predictions of bond characteristics, and employing the derived econometric model, this work concludes whether Mongolia is able to sustain an issue of sovereign bonds of the announced size.