Kiel Institute research: returns on external sovereign bonds have been averaged at 7% annually across two centuries.
Excerpt from the Article
(...) A recent research paper by Josefin Meyer, Carmen Reinhart and Christoph Trebesch shines some valuable light on the history of emerging-market debt, and just why investors keep lending to spendthrift countries with a poor history of creditworthiness.
They spent years assembling a database of 1,400 foreign-currency government bonds from 91 countries since the Battle of Waterloo, for a total of almost 220,000 individual bond observations. They then compiled a separate database on missed payments and restructurings from more than 300 debt crises since 1815, allowing them to calculate bond-by-bond losses and to estimate overall returns.
And what did this Herculean, multiyear project yield? The insight that despite occasionally ruinous bankruptcies, emerging-market debt amply rewards investors for the additional risk. Indeed, Ecuadorean bonds have been the most lucrative bet, despite the frequency of defaults, as generous coupons more than make up for the regular restructurings.