countries and even regions are subject to market-related risks and shocks that can disrupt their behavior, just as companies are, and these risks are transmitted in the same way: through their capital structures. In fact any economic entity’s capital structure can be seen as a sort of volatility machine, one of whose main functions is precisely to

Since that is the case, any sovereign borrowing strategy that does not implicitly assume a fairly neutral position about the direction of credit spreads can involve a significant increase in volatility—and hence in the probability of distress.