Sovereign Debt Information
GDP-Linked Bonds: A New Design for Sovereign Debt Markets

A model set of terms and conditions, or “term sheet,” for GDP-linked sovereign bonds has been prepared by an ad hoc working group consisting of investment managers, lawyers and economists from the Bank of England, together with support from ICMA and other trade associations.
  • The basic concept of GDP-linked government bonds is for their coupons and principal payments to be indexed to nominal GDP and in so doing allow both the burden of servicing interest payments and repayment of principle to adjust with the sovereign’s ability to pay.  
  • The major market and social welfare benefit of this is to reduce the risk of sovereign debt crises and disruptive defaults during a recession or downturn. In this regard, often GDP-linked bonds are seen as a form of holding equity in a sovereign, whose entire return will vary with economic performance instead of on a fixed basis.  
  • GDP-linked bonds can be designed to reduce the default risk premium by allowing the debt servicing burden to be reduced in times of fiscal duress. On the other hand, for investors, particularly those who believe a particular sovereign may be on its return to prosperity, GDP-linked bonds offer returns that can later outperform corresponding conventional bonds.
  • Over a longer period of time of continued issuance, GDP-linked debt as well as other forms of state-contingent debt could work to de-risk sovereign balance sheets.
ICMA is conducting a consultation on the new London Term Sheet with interested members.
The London Term Sheet and related materials:

We attach a paper published recently by the Bank of England in the link below.  

Financial Stability Paper 39: Sovereign GDP-linked bonds - James Benford, Thomas Best and Mark Joy with contributions from other central banks

All questions on the above may be directed to:

Leland Goss 
Managing Director, General Counsel; Member of ICMA's Executive Committee
Direct line: +44 20 7213 0336
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STANDARD COLLECTIVE ACTION CLAUSES, PARI PASSU AND CREDITOR ENGAGEMENT PROVISIONS FOR THE TERMS AND CONDITIONS OF SOVEREIGN NOTES


ICMA has published model collective action clauses, pari passu and creditor engagement provisions for inclusion in the terms and conditions of sovereign debt securities. The use of these terms in sovereign notes is intended to facilitate future sovereign debt restructurings.

ICMA NEW YORK AND ENGLISH LAW STANDARD CACs, PARI PASSU AND CREDITOR ENGAGEMENT PROVISIONS - MAY 2015

ICMA STANDARD CACs, PARI PASSU AND CREDITOR ENGAGEMENT PROVISIONS - BLACKLINE AUGUST 2014 VS MAY 2015

ICMA STANDARD CACs - August 2014

ICMA STANDARD PARI PASSU PROVISION - August 2014


The Centre for Interantional Governance Innovation (CIGI) in Canada has published a useful paper in Feburary 2015 entitled "Sovereign Bond Contract Reform: Implementing the New ICMA Pari Passu and Collective Action Clauses".

The Peterson Institute for International Economics has published a useful article in regard to the ICMA sovereign debt contract reforms, entitled "A Sensible Step to Mitigate Sovereign Bond Dysfunction" by Anna Gelpern on 29 August 2014
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For historical information on CACs, see here.

For archived sovereign debt informaton and the ICMA sovereign bond consultation paper, click here.

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