While sovereign bonds may be safer and more liquid than other instruments at a given point of time, there is no guarantee that they will remain so as both credit risk and liquidity risk of sovereign debt are dynamic in nature, and in fact, can shift deceptively so as these risks materialize from seemingly calm initial states.
Sovereign debt-bank nexus and Eurozone sovereign debt crisis The potential negative impact of sovereign debt-bank nexus and the need for addressing it has attracted much international attention, particularly in Europe. Exposures of resident banks to domestic sovereign debts in countries that faced debt crisis (Greece, Italy, Ireland, Portugal, and Spain, or GIIPS) increased significantly during and after the crisis.