Money a national government owes, and the risk that it might not pay it back on time.
Sovereign debt is money borrowed by a national government, usually through selling bonds to investors around the world. Almost every country carries some. The concern investors watch for is a government's ability and willingness to keep paying it back, reflected in interest rates it has to offer to attract lenders, and in credit ratings from agencies that assess that risk. A "sovereign debt crisis" is what happens when investors lose confidence a government can manage its obligations, which tends to spike borrowing costs and can ripple into currency and banking stress well beyond that one country.
Part of the Open Bell Glossary — plain-English explanations of the terms that come up on the show. Browse every term.