Features and Advantages Typical maturities are years. The coupon interest may be fixed or floating. Payments may be annual or semi-annual. Although issued as long term, Eurobonds may be sold before maturity; the market conditions at the date of cash-in are taken the as basis for the sale price. Higher than expected returns can be obtained in a market where interest rates decline, but the reverse is also possible.
When sold, the bonds are made out to the bearer; however, physical delivery to the buyer in reality is not possible. The difference between buy-sell quotations varies according to the liquidity and transaction volume of the bond. Key Takeaways A eurobond issue may be used to finance a company's expansion into a foreign market. The bond raises the money needed in the currency that is needed, without the forex risk.
An investor may gain exposure to a foreign market while investing in an established domestic company. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear.
Investopedia does not include all offers available in the marketplace. Related Articles. Fixed Income Essentials Diaspora Bond. Corporate Finance How U. Firms Benefit When the Dollar Falls. Partner Links. A global bond is a type of bond issued and traded outside the country where the currency of the bond is denominated in.
What Is a Samurai Bond? A samurai bond is a yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations.
What Is a Dollar Bond? A dollar bond is a U. What Is Currency Internationalization? Currency internationalization is the widespread use of a currency outside its country of issue, including for transactions between nonresidents. The liquidity of such bonds tends to be higher if they are issued in a country whose economy and currency are strong. Issuers can also avoid some currency risk i. A disadvantage of Eurobonds is that they usually have lower rates of return i.
Further, in recessions, some Eurobonds have also been known to have issued a negative rate of return to investors. Eurobonds are usually bearer bonds i. The only requirement is that holders of such bonds must have the same in their possession. An attractive feature about Eurobonds is that interest on such bonds is paid without any deduction of tax i. The organization, International Capital Markets Association, a self-regulatory body, does impose certain rules, restrictions, and standardized procedures on the issuing and trading of Eurobonds.
These remain outside the purview of official regulation of the country of the currency in which they are denominated. Given below is a workout of a zero-coupon Eurobond.
These are usually sold at a deep discount to the face or par value and there are no scheduled periodic interest payments. Bearer form means the bond isn't registered and as a result, there's no record of ownership. Instead, physical possession of the bond is the only evidence of ownership. A growing portion of Eurobond issuance is from emerging market nations, with both governments and companies seeking deeper and more developed markets in which to borrow.
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