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Eurobonds

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  • 1. EUROBONDS www.StudsPlanet.com
  • 2. • Eurobond market – Underwritten by a multinational syndicate of banks and are placed mainly in countries other than the one in whose currency the bond is denominated. – Also known as an “international bond”. – Eurobonds are not traded on a specific national market. • Eurobonds are debt agreements that are denominated in a currency other than that of the country in which they are held – E.g., a bond denominated in yen sold in the United Kingdom www.StudsPlanet.com
  • 3. • About 75% of eurobonds are denominated in U.S. dollars • Firms issuing dollar-denominated Eurobonds pay a slightly lower interest rate than they would pay in the U.S. www.StudsPlanet.com
  • 4. The main advantages of Eurobonds are… • increased liquidity of European bond markets • protection from large market shocks and erratic market discipline • guaranteed funding for all EMU countries • an improvement in the international position of the euro. www.StudsPlanet.com
  • 5. The main disadvantages are… • possible free-riding problems • tensions with the no-bailout clause • credibility and political viability www.StudsPlanet.com
  • 6. • The euro bond market developed quite well since 2001. The growing importance of • the euro as an international investment currency has made the market for eurodenominated • issues more attractive for both investors and issuers. A key element • behind these developments of the European bond market in this period was the • impetus for a better integrated and more liquid market and the increasing diversity • of innovative products, such as index-linked bonds, real-time bond indices, fixed • income exchange traded funds, credit derivatives and structured products. www.StudsPlanet.com
  • 7. www.StudsPlanet.com