The international bonds issued in a domestic country by a non-domestic entity are known as Euro Bonds, Foreign Bonds and global bonds. Whether it is a foreign bond, a Eurobond, Global bond or Foreign-Pay Bond or some other format, the investors in these bonds will get back in full the amount originally invested by them with promised interest from the bond issuer Government or the company. Though these bonds look alike they are separate investment options. Let us examine here the nature of each of these bonds.
A foreign bond is a bond issued by a foreign company or institution in a country which is outside its home country. The foreign bond is usually denominated in the currency of where it is expected to be sold. For example, if a Japanese company wishes to issue a U.S. dollar currency bond in the U.S because Japanese company seeks out investors from the United States to fuel their operations. These bonds are called after the country where they are issued. For example, Yankee bonds are issued in U.S. Dollars, but created by non-American company in the United States. The ‘Samurai bonds’ are issued in Japan, denominated in yen, but issued by non-Japanese company. Bulldog bonds are issued in pounds sterling by non-British company in Britain. The ‘Matilda bonds’ are the bonds denominated in the Australian dollar and issued on the Australian market by a foreign, non-Australian entity that seeks to raise capital from Australian investors.
Eurobond is a generic term that applies to any bond issued without a specific jurisdiction. It does not refer to bonds issued only in Europe. “Eurobond” is a bond issued by a company denominated in a currency other than that of its country. For example, if an Indian company issued a U.S. dollar currency bond in Japan that is known as USD-denominated Eurobonds. Similarly, if an Indian company issued Japanese yen denominated currency bond in US it is referred as Euroyen bonds. Likewise, ‘Eurosterling’ bonds are denominated in sterling, but are sold outside of the United Kingdom.
Global bonds are bonds that are issued and traded in two or more markets at the same time. These bonds are normally issued by Multinational Corporations or Governments offering the bond to a large number of international investors. The bond is denominated in one market’s currency.
A foreign-pay bond is a bond issued by a local company in its local country that is denominated in a foreign currency. For example, a USD -denominated bond issued by Infosys in India would be a foreign-pay bond.
- What is a Zero-Coupon Bond?
- What are Bonds, coupons, and yield to maturity?
- Convertible bonds, floating bonds, and, negative bonds