Long-Term Returns in Distressed Sovereign Bond Markets: How Did Investors Fare?

Sovereign debt restructurings are perceived as inflicting large losses to bondholders.However, many bonds feature high coupons and often exhibit strong post-crisisrecoveries. To account for these aspects, we analyze the long-term returns of sovereignbonds during 32 crises since 1998, taking into account losses from bond exchanges as wellas profits before and after such events. We show that the average excess return over risk-freerates in crises with debt restructuring is not significantly lower