Hello all,
Could someone please explain the difference between a global bond and a eurobond? (An example would be greatly appreciated)
Thanks.
US issuing Euro/Yen/Sterling/any ccy other than USD denominated bonds outside of US - Eurobond The above or US issuing USD denominated bonds outside US or even in US -Global bond
A Eurobond can actually also be issued in USD (in fact the very first Eurobonds were issued in USD). The definition is not tied to the US necessarily (although the first Eurobonds emerged outside the US as an effort to circumvent US regulation). A Eurobond is a bond issued in a currency other than the currency of the country or market in which it is issued. So a bond issued in USD in say France (local currency EURO).
The global bond market consists of two bond markets:
1) National Bond Market
2) Eurobond Market
regarding 1), National Bond market includes all bonds issued and traded in a specific country and denominated in the currency of that country (e.g. US denominated Bond isseud and traded in the US). There is a distinction in the national bond market between:
a) domestic bonds: bonds issued by companies incorporated in that country (e.g. Ford Motors issued US denominated bonds in the US).
b) foreign bonds: bonds issued by companies incorporated in another country (e.g. Toyota issues US denominated bonds in the US).
regarding 2), A Eurobond is a bond issued in a currency other than the currency of the country or market in which it is issued (e.g. Ford Motors issues US denominated bonds in the UK). Eurobonds are typically less regulated than domestic and foreign bonds because they are issued outside the jurisdiction of any single country. They are usually unsecured bonds and can be denominated in any currency ( including USD ), including the issuerâs domestic currency. They were originally created to circumvent a tax that the US government imposed on 1 b), the foreign bonds.
Global bonds are bonds that are issued simultaneously in the Eurobond market and in at least one domestic bond market.
Yup. Thatâs why I mentioned âUSâ issuing a non USD bond since OP wanted an example.
Yup. Thatâs why I mentioned âUSâ issuing a non USD bond since OP wanted an example.
But you said outside of the US, and then it can be in any currency (except for the currency of the country where it is issued).
So if the US Government issues a bond in the UK, they can issued it in USD, it just cannot be GPB (although I am not sure if goverments issue Eurobonds).
Inside of the US, it cannot be USD, because then it would be part of the national bond market.
If a US co issues a bond in UK, it can be in any ccy pounds/euros/yen/peso whatever except the issuerâs ccy (USD) - this is an example of a Eurobond.
I donât think that this is correct. From the curriculum (Reading 52, p.311):
"âŚThey[Eurobonds] are usually unsecured bonds and can be denominated in any currency, including the issuerâs domestic currencyâŚ"
So a US company that issues a USD bond in the UK would be an example of a Eurobond (it just cannot be the currency of the country where it is issued).
From Schweser:
_ âEurobonds are ⌠denominated in a currency different from the currency of the country in which they are soldâ. _
From Investopedia:
_"_What is a âEurobondâ?A bond issued in a currency other than the currency of the country or market in which it is issued."
I donât think it has anything to do with the currency of the issuing entity. It is the market where it is issued that matter.s
Thanks!! Appreicate this example.
Now⌠is it a global bond if it issued simultaenously in the Eurobond market and in a foreign bond market? (example - toyota issuing a US denominated bond in UK and also in the US) ?
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Yes, if Toyota issued a USD denominated bond in the UK (Eurobond market) and also in the US (domestic bond market) that would be an exampe of a global bond. Notice that domestic in this context means that the bond is issued in the currency of the country where it is issued. It does not have anything to do with the country the issuer is from (Toyota does not need to issue the bond in Japan).