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Comment by malfist | Hacker News Reader

Why not? Percentage is the same for dollars as it is for yen or franks or pesos

Well for one thing, different currencies have different rates of inflation. If one currency has 10% inflation and another has 1%, the second countries bonds at 5% will have a higher real return than the first, even if the risk of defaulting were the same, so the first country will have to offer a much higher coupon to find any buyers.

Also governments can influence demand, e.g. by mandating banks or pension funds buy their bonds, thereby pushing yields down, without changing the risk of default.

> If one currency has 10% inflation and another has 1%, the second countries bonds at 5% will have a higher real return than the first

It's not how it works. If both currency maintain change parity over time, then the inflation rate in one country compared to the other is irrelevant. “Real” (inflation adjusted) numbers make sense for consumers and local governments, but from an investing standpoint, the only thing that matters is the variation on FX rate.

And unlike what the myth of “inflation is the loss of value of a currency” says, those are actually very loosely correlated (and it tends to be anti correlated during inflation spikes due to central banks' interests rates).

> Why not? Percentage is the same for dollars as it is for yen or franks or pesos

That's a fair question if you aren't int he industry. Inflation would be the best example of why you can't do that.

Would you rather have a Zimbabwe bond that pays 10%(when they had 10,000% inflation a year) or a US bond that pays 5%

The eurozone countries' bond rates are distorted by the Euro.

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