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2. Introduction
 A financial market is the mechanism that facilitates
the transfer of funds from lenders (surplus units) to
borrowers (deficit units).
 The institutions & instruments are integral part of
financial market.
 When funds flow across national boundaries and the
transfer is between parties residing in different
countries, there comes into existence the
international financial markets.
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3. Motives for internationalization of
financial transactions
 Difference in interest rates
 International diversification
 Economic growth prospects
 Exchange rate fluctuations
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4. Sources of international funds
 Multilateral development banks or agencies
 Government/governmental agencies
 International banks
 Securities markets
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5. Segments of International Financial
Markets
 International Bond Market
 International Equity Market
 International Money Market
 International Credit Market
 Foreign Exchange Market
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6. Types
International bonds
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Foreign bonds & euro bonds
Global bonds
Straight bonds
Floating rate notes
Convertible bonds
Cocktail bonds
Callable and puttable bonds
Sinking fund bonds
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7. Foreign bonds & euro bonds
 Foreign bonds are underwritten by the underwriters
of the country where they are issued
 Maturity based on the need of investors of a particular
country.
 Foreign bonds are subjected to government
regulations in the country where they are issued.
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8. DIFFERENCES
Foreign Bond
Euro Bond
 If an Indian company issue
 But in case of euro bonds
bond in the New-York and
bond is dominated in US
dollar, such Bonds are called
foreign bonds.
 Foreign bonds underwritten
by the underwriters of the
country where they issued.
they are dominated in
currency other than the
currency of the country
where the bonds are issued.
 Euro bonds underwritten by
the underwriters of multi
nationality
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9. DIFFERENCES
Foreign Bond
Euro Bond
 Foreign bonds subjected to
 Euro bonds are free from
governmental
rules
and
regulations
 Foreign bonds is determined
keeping in mind the investors
of a particular country.
rules and regulations.
 Euro bond are tailored to the
needs of the multinational
investors.
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10. Global bonds
 First it issued in 1989 by world bank
 It also issued by the company
 It dominated in 7 country’s currency
 Australian dollar
 Canadian dollar
 Japanese yen
 Swidish crona
 Euro
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11. Features
Eurobonds
 underwritten by an internationally.
 offered simultaneously to investors in a number of
countries .
 issued outside the jurisdiction of any single country.
 they are not registered through a regulatory agency.
 Make coupon payments annually.
 Large in size offered for simultaneous placement in
different countries
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12. Global bonds
 Bonds that can be offered within the euro market and
several other markets simultaneously.
 Unlike Euro bonds, global bonds can be issued in the
same currency as the country of issuance.
 For example, a global bond could be both issued in
the United States and denominated in U.S. dollars.
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13. Straight bonds
 Interest rate is fixed known as coupon rate
 It is a traditional type of bond
Its varities:
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-Bullet-redemption bond
-Rising-coupon bond
-Zero-coupon bond
-Currency options
-Bull and bear bonds.
-Debt warrant bonds
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14. Floating rate notes
 Does not carry fixed rate of interest
 Interest quoted as a premium or discount to a
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reference rate(LIBOR)
Interest rate revised periodically.
Perpetual FRNs
Minimax FRN
Drop lock FRN
Flip flop FRN
Mismatch FRN
Hybrid fixed rate reverse FRN
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15. Convertible bonds
 Convertible into equity shares
 Some convertible bonds have detachable warrants
involving acquisition rights
 Automatic convertibility into a specified number of
shares.
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16. Cocktail bonds
 Denominated in a mixture of currencies.
 Represent a weighted average of 5 currencies
 Investors get currency diversification risk
 Depreciation offset by appreciation of other.
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17. ADR’S
 Represents ownership in the shares of a non-U.S.
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company that trades in U.S. financial markets
ADRs carry prices in US dollars,
pay dividends in US dollars,
And can be traded like the shares of US-based
companies.
JPMorgan Citibank
Deutsche Bank
Bank of New York Mellon
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18. GDR’S
 Global Depository Receipt (GDR) - certificate
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issued by international bank, which can be subject of
worldwide circulation on capital markets.
GDR's are emitted by banks, which purchase shares of
foreign companies and deposit it on the accounts.
Global Depository Receipt facilitates trade of shares,
especially those from emerging markets.
Prices of GDR's are often close to values of related
shares.
Very similar to GDR's are ADR's.
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19. Procedure of issue
 Deciding the size of the issue , the market of the issue
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, price of the issue and the formalities involved.
Approaching a lead manager
Fulfilling the formalities and preparing the prospectus.
Depositing shares to be issued with the custodian
Custodian asks depository located in foreign country
to issue DR
Proceeds flow from depository to custodian bank to
issuing company
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20. Documentation
 1. The prospectus
 2.The depository agreement
 3.The
agreement between the custodian and
depository.
 4.The underwriting agreement
 5.A copy of the agreement with the listing stock
exchange.
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21. Types
International Money Market
Instruments
 Euro notes
 Euro commercial paper
 Medium term euro notes
 Certificate of Deposit
 Bankers’ acceptance (BA)
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22. Euro notes
 Like PNs for obtaining short term funds.
 Denominated in any currency other than the currency
of the country where they are issued.
 Documentation facilities are minimum.
 Represent Low cost funding route.
 Investor too prefer them in view of short maturity.
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23. Euro commercial notes
 A short-term, debt instrument
 Corporations issue euro commercial papers in order
to tap into the international money markets for their
financing.
 An example of a euro commercial paper is a British
firm issuing debt in U.S. dollars to encourage
investment from dollar-investors in international
money markets.
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24. Medium term euro notes
 Longer maturity between 1 year to 5 years.
 Short term euro notes are allowed to roll over.
 Issued to get medium term funds in foreign currency
without any need for redemption and fresh issue.
 It is not underwritten yet there is provision for
underwriting.
 It carry fixed interest rate
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25. Types
Medium Term Notes
 Euro Medium Term Notes (EMTNs)
 Global Medium Term Notes (GMTNs)
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