The authors study the effect of the adoption of collective auction clauses (CACs) on government bonds’ yields by exploiting secondary market data on sovereigns quoted in international markets from March 2007 to April 2011. The presence of CACs is assessed security by security. Using a panel data approach, the authors find that CACs tend to lower yields for middle ratings, but their effect is weaker and weaker as we move towards the extremes of the rating scale. A U-shaped relation between the effect of CACs on yields and ratings thus emerges, which proves to be sound against several checks. The relation appears also quite robust throughout the sample periods. A simple theoretical model predicting such a pattern is provided, formalizing that CACs are helpful for ordered restructuring though less valuable when the probability of default is very small (best rated issuers) or the moral hazard risk is very high (worst rated issuers).