International Bond Market

Foreign bonds and Eurobonds

• A foreign bond is a Corporate bond issued by a foreign
entity in the domestic currency of the country of issue.
– A British company that issues a dollar bond in the US
market.
– A German MNC issuing dollar-denominated bonds to US
investors.
• Foreign bonds have names symbolizing the country
whose currency is being borrowed.
– Yankee for dollar
– Bulldogs for sterling bonds
– Samurais for yen and
– Matadors for Spanish euro-denominated bonds.
 Foreign bond
Dutch US

Bond issued by
Dutch borrower
denominated in
USD
 Eurobond
• A Eurobond is a bond that is sold by a
government, institution or company in a
currency different from the country where the
bond is issued.
– A dollar bond sold in London is a dollar Eurobond.
– A sterling bond sold in Germany is a sterling
Eurobond.
 Eurobond
Dutch UK

Bond issued by
Dutch borrower
denominated in
USD

Eurodollar
bond
 Types of international bonds
• Straight fixed-rate issues
• Euro-medium-term Notes
• Floating-rate Notes (FRN)
• Equity related bonds
– Convertible bonds
– Bonds with equity warrants
• Zero-coupon bonds
– Stripped bonds
• Dual-currency bonds
Instrument Frequency of Size of coupon Payoff at maturity
interest payment payment
Straight fixed-rate Annual Fixed Currency of issue
FRN Quarterly or Variable Currency of issue
semiannual
Convertible bonds Annual Fixed Currency of issue or
conversion to equity
shares
Straight fixed-rate Annual Fixed Currency of issue plus
with equity equity shares from
warrants exercised warrants
Zero-coupon bond None Zero Currency of issue
Dual-currency bond Annual Fixed Dual currency (coupon in
one currency and
maturity in another
currency