Working Paper 20
Frontier Sovereign Bond Returns in Dollar Terms: Carry, Currency, and Default Risk
October 2026
Abstract
We rebuild frontier sovereign bond returns in U.S. dollar terms for 18 economies, 2010-2024, with explicit restructuring haircuts. Carry does not survive the currency leg: Ghana, the +267% local-currency poster child, earned -78% in dollars; Kyrgyzstan -13%. Starting yield still predicts forward dollar returns, strengthening with horizon (60m t=2.02, R2=0.36), but the currency eats half the local carry. Rising debt-to-GDP predicts lower returns; IMF programs do not. The premium held 2010-2015 but vanished 2016-2021.