Mineral windfalls, global liquidity, and the composition of sovereign external financing

The energy transition is reshaping not only how much sovereigns borrow, but the instruments through which they borrow. Using a monthly panel of 173 sovereign borrowers over 2005–2024 and a two-dimensional Bartik design exploiting predetermined mineral export intensity and pre-sample bond-market reliance, we show that transition-mineral windfalls shift sovereign external financing toward bond markets, and that this shift is largest when global liquidity is tightest. We provide an explicit information-theoretic microfoundation: tighter liquidity increases the dispersion of creditor priors, raising the Kalman gain on fiscal signals and generating larger spread compression for the same improvement in expected revenues. A mechanism decomposition confirms the indirect creditworthiness channel — mineral shocks predict broad bond-share increases but not SPV financing, and EMBI spreads compress significantly for CM exporters — ruling out the direct resource-contracting alternative. The effect is confirmed on both margins of bond-market participation (HasBond: +1.5 pp. per shock SD; BondShare: δ = 0.030, p < 0.01) and is mechanism-specific: a sign reversal under broad commodity intensity persists within EME income groups, ruling out income composition. Because bonds mature faster than bilateral loans (9.5 vs. 14.0 years), the composition shift raises rollover exposure by up to 0.11 pp. of GDP per year for high-yield EMEs. A quantitative nullification bound confirms the welfare implication is robust to endogenous maturity adjustment.