NAME ROLL NO.Bhavik Parmar 28Sonu Pethani 32Harsh Sanghavi 34Shashank Pai 26Vaishali Rawal 36Dharmik Patel 30 3
WHAT IS BOND MARKET ?The bond market is a financial market where participants buy and selldebt securities , usually in the form of bonds.The bond market primarily includes:- I) Government-issued securities. II) Corporate debt securities. 4
MEANING OF INTERNATIONAL BONDA bond issued in a country or currency other than that of the investor orbroker. They include Eurobonds, which are issued in a foreign currency,foreign bonds, which are issued by a foreign government or corporation inthe domestic market, and global bonds, which are issued in both domesticand international markets. INTERNATIONAL BOND IS FURTHER CLASSIFIED IN THREE TYPES1) Domestic Bond2) Euro Bond3) Foreign Bond
FEATURES OF INTERNATIONAL BOND1) It is a debt market2) It is a fund raising market3) Fixed income instrument4) Issued in foreign currency5) It channelizing savings
THE COMMON PROCESS OF ISSUING BONDStep 1:-A borrower will contact an investment banker.Step 2:- The lead manager will invite other banks.Step 3:-The managing group and banks will serve as underwriters for the underwriter issues.Step 4:-The various members of the underwriting syndicate receive a portion of the spread.Step 5:-The lead manager receives the full spread.
INSTRUMENTS OF INTERNATIONAL BOND MARKET1) Straight Fixed-Rate2) Floating-Rate Note3) Convertible Bond4) Straight Fixed-rate with equity warrants5) Zero coupon bond6) Dual-Currency bond
ADVANTAGES & DISADVANTAGES OF INTERNATIONAL BOND Advantages DisadvantagesDiversify your portfolio Outperformed by Mutual FundsInternational fund raising Feesinstrument RiskFixed income market Limited SelectionInvestment avenue(short term aswell as long term)
CHARACTERISTICS OF INTERNATIONAL BOND MARKET INSTRUMENTSInstruments Frequency of Size of Interest Pay off at Interest payment payment MaturityStraight Fixed-Rate Annual Fixed Currency of issueFloating-Rate Note Quarterly or Semi- Variable Currency of issue annualConvertible Bond Annual Fixed Currency of issue or conversion to equity shareStraight Fixed-rate Annual Fixed Currency of issuewith equity warrants plus equity shares from exercised warrantsZero coupon bond None Zero Currency of issueDual-Currency bond Annual Fixed Dual currency 11
INTERNATIONAL BOND AMOUNTSOUTSTANDING BY MAJOR INSTRUMENTSINSTRUMENTS Dec. 2008 Dec. 2009 March 2010Straight fixed-rate 14428.4 17274.2 17235.9Floating-rate note 7892.0 8357.2 7988.8Straight fixed-rate with equity 396.7 447.2 446.1warrantsTotal 22717.1 26078.6 25670.8 12
INTERNATIONAL BOND AMOUNTS OUTSTANDING BY MAJOR ISSURESISSURES Dec. 2008 Dec. 2009 March 2010Financial Institutions 17,925.70 20,030.10 19,531.10Governments 1,794.60 2,232.20 2,254.40International Organizations 637.90 791.50 814.10Corporate Issuers 2,359.00 3,024.70 3,071.20Total 22717.20 26078.50 25670.80 13
INTERNATIONAL BOND AMOUNTSOUTSTANDING BY MAJOR CURRENCIESCURRENCIES Dec. 2008 Dec. 2009 March 2010Euro 10873.9 12387.6 11813.8US Dollar 8215.1 9429.0 9718.1Pound Sterling 1701.8 2145.5 2028.3Yen 746.7 693.9 668.7Other 1179.7 1422.5 1441.9Total 22717.2 26078.5 25670.8 14
WHAT IS DOMESTIC BONDBonds help acquire orders and, in many cases, are a precondition forsuccessful conclusion of a contract.For all entrepreneurs planning to enter tenders and concludecontracts for the delivery of goods or services we offer a wide rangeof domestic contract bonds. MEANING OF DOMESTIC BONDBonds issued in the country and currency in which they are traded.Unlike international bonds, domestic bonds are not subjectto currency risk. They usually carry less risk, as the regulatory andtaxation requirements are usually known to investors in domesticbonds, or at least to their brokers and accountants.
TYPES OF DOMESTIC BONDPublic Sector Undertaking BondsCorporate BondsFinancial Institutions and BanksEmerging Bond MarketsTax-Savings Bonds
WHAT IS EUROBOND ?A euro bond is a debt contract between a borrower and aninvestor, which records the borrowers obligation to pay interestand the principal amount of the bond on specified dates.For -A firm issuing Yen bonds outside Japan . When aJapanese firm issues yen bonds in the Euro market.
THE PROCEDURE FOR THE EUROBOND1) Select a Lead Manager:- The borrower chooses one investment bank to be the lead manager of the bond issue.1) Organize a Syndicate:- The lead manager negotiates with other banks to form managing group. This group then negotiates the terms of the bond issue with the borrower.2) Selling the Bonds:-Once the syndicate is formed and the terms of the issue are agreed upon, the managing group buys the bonds from the borrower. The managing group then sells the euro bonds to the underwriters.3) Principal Paying Agent:-A agent or trustee may also be appointed by the borrower to handle the paperwork and legal aspects of the euro bond issue and act as principal agent.
UNIQUE CHARACTERISTICS OF EUROBOND1) Coupon (The Interest Rate)2) Maturity3) Issuer4) Secondary Market5) Ratings6) Taxation7) A Eurobond is only for Medium and Long-term
ADVANTAGES & DISADVANTAGES FOR COMPANIES TO ISSUE EUROBONDS Advantages DisadvantagesLarge amounts There are issue costs to take into account.Freedom and Flexibility If the debt is not matched firmLower cost of issue may have to be open to foreign exchange risk.Lower interest costLonger maturities
ADVANTAGES & DISADVANTAGES FOR INVESTOR TO ISSUE EUROBONDS Advantages DisadvantagesTax free income Not a good idea for investors who may need a repayment.Low Risk investmentConvertible to Equity There is always the risk defaulter.Liquid investment
INTRODUCTUON ON FOREIGN BONDForeign bonds are regulated by the domestic market authorities and areusually given nicknames that refer to the domestic market in which theyare being offered.A foreign bond allows an investor a measure of internationaldiversification without subjection to the risk of changes in relativecurrency values.
DISTINCTION Foreign Bond market Euro Bond market -Foreign government or -Any borrower with creditcorporation or international standing explicit rating rateinstitution US-SEC-Register -Any widely used by -Local currency international country - -Typically US $50-500 Millions Typically US $50-500 Millions -Bearer expect , in Bulldog and -BearerYankee markets -Annual for fixed -As in rate bond and quarterly for FRN’scorresponding domestic market -Usually London Luxembourg -Foreign stock exchange -Wide international profile. -Domestic and overseas Private individual play a major role