Defaulted Foreign Bonds

Report Outline
Defaulted and Prospective Defaults on Foreign Bonds
The United States as a World Creditor
Britain's Early Experience as a Creditor Nation
Default and Repudiation by American States
Britain's Experience as a World Creditor, 1870–1914
Special Focus

Defaulted and Prospective Defaults on Foreign Bonds

Interest on half a billion dollars worth of foreign bonds owned by individual and institutional investors in the United States was defaulted in 1931. Defaults on additional foreign issues of which more than $300,000,000 are in American ownership have been announced for 1932, and further suspensions of payments may develop as the year progresses.

Moat of the defaults announced during 1931 came on the heels of a long series of revolutions in South America. South American bonds upon which interest has been or soon will be defaulted total $704,706,330, which is almost exactly half of the total American holdings of South American long-term, interest-bearing securities.

Hungary is the first European nation to suspend payments on its foreign obligations. On December 22, 1931, the Hungarian government announced that foreign exchange would not be available for the service of foreign debts during 1932. Funds for the payment of interest due in the United States on January 1 had already been deposited in New York, so that actual defaults on Hungarian issues will not occur until later in the year. Recent dispatches from Vienna have forecast that Austria, Bulgaria, Yugoslavia, and Greece would soon follow the example of Hungary by declaring their complete or partial inability to meet their foreign obligations. While these reports have been denied by diplomatic representatives of various of these countries, additional defaults by Central European countries are distinctly recognized as one of the possibilities of the present situation. American long-term, interest-bearing investments in the four countries named above total more than $200,000,000.