Tellimer Sovereign PD: 3-Year & 5-Year default probability estimates
We now estimate the probability of a sovereign defaulting over 3 years and 5 years, in addition to our existing 12-month estimate. Built on top of the same proven model that has correctly predicted 26 of the last 28 sovereign Eurobond defaults, the new horizons give clients a complete forward view of sovereign default risk — not just what's about to blow up, but what's starting to crack.
✨ What's new
- Three-horizon PD term structure: Each sovereign now shows 12-month, 3-year, and 5-year default probabilities, giving a complete forward curve of credit risk in a single view.
- Escalating early-warning framework: The three horizons work as layered alerts — structural fragility (5Y) → heightened stress (3Y) → imminent crisis (1Y) — so risk can be monitored and escalated systematically.
- EM & frontier coverage: All 84 Eurobond-issuing emerging and frontier market sovereigns, updated monthly.
- Cross-country comparability: The term structure is derived from a consistent methodology, so PD estimates are directly comparable across countries and horizons.
💡 Why it matters
- See risk building years ahead: The 3-year PD catches 63–75% of defaults roughly 2 years before they happen — well before stress shows up in spreads or agency downgrades.
- Spot structural fragility early: The 5-year PD flags countries 4–5 years out. Even intermittent spikes above 20–25% have historically been informative, with only 1 in 20 signals a false alarm.
- Fundamentals-based, not market-implied: Built on 100+ macro-financial variables, the model provides an objective assessment free from the sentiment and liquidity noise that affects market-implied PDs.
- Catches what the 12-month model misses: The two defaults missed by the 12-month model (Zambia 2020, Ethiopia 2023) were both flagged at longer time horizons.