Sovereign debt securities, like other financial assets, can be subject to massive sell off, leading to sharp price and yield fluctuations. Tracking the demand-side dynamics of sovereign debt can be useful to assess government vulnerability to changes in both domestic and foreign holder preferences.
The figures show the level of public debt in high-debt EMU countries – Greece, Ireland, Italy, Portugal and Spain – broken down by debt holders, and highlight the share held by the official sector – such as the European Stability Mechanism (ESM), the ECB, the IMF, and the National Central Banks.
The analysis suggests that, to date, the official sector holdings of government bonds in Greece, Portugal and Ireland, are very significant, while the role of private foreign and domestic sectors is minor. In Greece, the ESM, ECB and IMF hold an amount of public debt equivalent to over 142% of GDP (80% of total debt); similarly, in Portugal and Ireland, the level of public debt held by Euro area official investors is respectively 39% and 24% of GDP (about 32% and 35% of total debt). Also, in Ireland, the lion's share of the domestic sector amount is held by the Irish National Central Bank.
In Italy and Spain, the situation is different: the official sector holds a minority of the public debt. Most government bonds are owned by private investors: respectively, 79% and 53% of GDP and 60% and 55% as a share of total debt.
A higher reliance on private investors implies uncertain funding conditions and a higher roll-over risk. In Greece, Portugal and Ireland, the overwhelming contribution of Euro area institutions to public debt holdings mitigates this risk significantly and helps to contain government bond spreads and yields.