What is sovereign?

In the broadest terms, it refers to a body of people (e.g. a government) that has ultimate authority over a state.

In the world of finance, it may refer to sovereign debt or sovereign bond, which is the money owed by a country's government, or an historic gold coin issued in the UK.

Where have you heard about sovereign?

The term 'sovereign debt crisis' often hits the headlines when a country experiences economic turbulence and can't afford all of its debt repayments. Greece is one example of a country that's faced this situation in recent years.

What you need to know about sovereign.

A country's sovereign debt will often take the form of bonds, which are issued by its government in order to raise money. Countries with weak credit ratings might look to borrow money directly from institutions like the World Bank.

Governments may increase their sovereign debt in an attempt to drive economic growth. The money they generate by taking on more debt can be invested in things like infrastructure projects.

Bonds issued by more established countries like the US and Britain are generally deemed low-risk, since they're not expected to default on their debts.

Find out more about sovereign.

A country's ability to borrow money may be influenced by its credit rating. For more on this, see sovereign credit rating.