Large, growing budget deficits and rising public debt-to-GDP ratios in advanced economies are rattling markets. With interest rates on government debt having gone from near zero (and even negative, in some cases) to much higher levels, rising short- and long-term bond yields have cast doubt on the sustainability of some public debts and led many to ask if a crisis might be looming.

There is no simple answer to this question. In some cases, a country will have large stocks of financial assets - such as foreign reserves held by the central bank, or assets held by sovereign wealth fun...