Banks in Europe, which hold Greece sovereign debts are to write down the value of these debts to half. This is to say, they lost 50 per cent of their investment value. Can you imagine that a country’s ability to re-pay its debts can be eroded by poor fiscal policies and government actions? So nations’ debts can too go into default as history had shown us, e.g. Russia (1998) and Argentina (2002) and now Greece (2011).
Investing in government treasury bills and government bonds carries risk just like private sector bonds, except that government bonds had better credit ratings than private sectors’. So it is wise to check on the country’s credit rating or the private corporation’s credit rating before buying these bonds.
Copyright © 2011, limkimtong for Living Investment
The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.