sovereign bond-backed securities (SBBS)

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Thinking big: debt management considerations for the EU’s pandemic borrowing plan

If not handled correctly, the European Union’s transition to take on a new role as an issuer of public debt risks crowding out existing markets. Managing that transition correctly is almost as big a challenge as spending the money itself.

By: Rebecca Christie Topic: European Macroeconomics & Governance Date: December 9, 2020
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Are SBBS really the safe asset the euro area is looking for?

The European Commission is pushing to create a synthetic euro-area-wide safe asset in the form of sovereign bond-backed securities (SBBS). However, SBBS do not fully fulfil their original promises. If introduced on a massive scale, they might increase the supply of safe assets in good times and loosen the link between sovereigns and banks. But they will not give governments a means to maintain market access during crises, they might change incentives for governments to default, and they could pose a problem to individual bonds not included in SBBS if, in the end, they are put at a regulatory advantage vis-à-vis individual bonds.

By: Grégory Claeys Topic: Finance & Financial Regulation Date: May 28, 2018