Why does a state have both currency reserves and sovereign debt simultaneously?

Question

When I have excess money I wouldn’t think of taking a loan which is much smaller than my savings. Why does a sovereign state issue sovereign bonds to borrow tens of billions dollars when it has in reserve over half a trillion dolars?

In: 5

Answer 1

First off, people absolutely carry debt when they have savings—somebody might have $100k in the stock market earning 8% while they have a $40k car loan at 1.9%. Not only are they earning more than they’re paying, it helps with keeping a pile of assets for a “rainy day” like major home repair.