Sovereign Debtscapes: The institutionalization of sovereign bond markets

Keywords: Sovereign debt, debt, financialization, sovereign bonds, imperialism, uneven development, institutional investors
Session Type: Virtual Paper Abstract
Day: Monday
Session Start / End Time: 2/28/2022 03:40 PM (Eastern Time (US & Canada)) - 2/28/2022 05:00 PM (Eastern Time (US & Canada))
Room: Virtual 67

Abstract

In the early 2000s, institutional investment firms such as BlackRock, Fidelity, and Invesco increasingly entered the sovereign bond market. Where the hedge funds of the previous era traded individual bonds, these new institutional investors simplify the business of sovereign debt. Researchers contextualize institutional investors as part of the rapid growth of financial capital and new technologies from the 1980s on. However, little is known about how these players impact the world of sovereign debt. Indeed, existing scholarship tends to either flatten the investment industry into a singular entity or assume that the vulture funds of the mid-90s still rule the market. In contrast, this chapter examines the causes and consequences of institutional investors' involvement in sovereign bond markets. Drawing on financial data and ethnographic research, I follow a ten-year bond issued in 2017 by the Republic of Ecuador in two ways. First, I harness a novel method to document who held the bond between October 2017 and December 2021, their investment type, and their location. Second, I follow the bond as it surfaces in discussions held by investors in a series of four events held between 2019 and 2021. These two approaches reveal how institutional investors substantially influence markets. As firms develop new portfolio management strategies, institutional investors are increasingly concerned with debtor countries' political, social, and economic affairs and use debt as a disciplinary mechanism for implementing neoliberal reforms. Taken together, the involvement of institutional investors in sovereign bond markets reveals a new phase in how financial imperialism unfolds.