Goverment bonds defaults

For those looking at getting higher returns from foreign government bonds, here are some wise words from Benjamin Graham below. Graham talks about the reliability of private bonds vs government bonds in Intelligent Investor.

“Bonds of Foreign Corporations. In theory, bonds of a corporation, however prosperous, cannot enjoy better security than the obligations of the country in which the corporation is located. The government, through its taxing power, has an unlimited prior claim upon the assets and earnings of the business; in other words, it can take the property away from the private bondholder and utilize it to discharge the national debt. But in actuality, distinct limits are imposed by political expediency upon the exercise of the taxing power. Accordingly we find instances of corporations meeting their dollar obligations even when their government is in default.”
Excerpt From: Graham, Benjamin. “Security Analysis.” McGraw-Hill, 2009. 

List of sovereign debt defaults:

http://en.wikipedia.org/wiki/List_of_sovereign_debt_crises

More Intelligent Investor quotes:

“I. Safety is measured not by specific lien or other contractual rights, but by the ability of the issuer to meet all of its obligations.3

II. This ability should be measured under conditions of depression rather than prosperity.

III. Deficient safety cannot be compensated for by an abnormally high coupon rate.

IV. The selection of all bonds for investment should be subject to rules of exclusion and to specific quantitative tests corresponding to those prescribed by statute to govern investments of savings banks.”

Excerpt From: Graham, Benjamin. “Security Analysis.” McGraw-Hill, 2009.