Does improving creditor coordination by strengthening CACs lead to efficiency gains in the functioning of sovereign bond markets? We address this question in a model featuring both debtor moral hazard
and creditor coordination under incomplete information. Conditional on default, we characterize the interim effi cient CAC threshold and show that strengthening CACs away from unanimity results in interim
welfare gains. However, once the impact of strengthening CACs on debtor's incentives are taken into account, we demonstrate the robust
possibility of a conflict between ex ante and interim effi ciency. We calibrate our model to quantify such a welfare trade-off and discuss the policy implications of our results
