What is a Eurobond?
Euro bonds refer to bonds that are denominated by a government, financial institution, and business enterprise of a country in a freely convertible currency of a third country on the international market, and the principal and interest are repaid. Its par value currency is not a bond in the currency of the issuing country. Eurobonds are not restricted by the capital markets of any country and are exempt from tax. The denomination can be calculated in the local currency of the issuer or other currencies. For multinational corporation groups and third world governments, European bonds are an important channel for them to raise funds. [1]
Eurobonds
- Traditional European bonds can be divided into
- Eurobonds were born in the 1960s, and they were a kind of rise with the formation of European currency markets.
- The main reasons why European bonds have such great charm for investors and issuers are:
- the first,
- Reliable investment and high yield
- Divided by par currency, European bonds can be divided into European dollar, European mark, European yen, European pound, and European Swiss franc bonds, among which the European dollar bond market has the largest proportion. Since the 1980s, the European mark and the European yen market
- Eurobonds
- The interest-bearing methods of European bonds include fixed-rate bonds, floating-rate bonds, convertible bonds, and multi-currency bonds. The period is usually 15 years, the longest can reach 30 years, but more short-term, such as 6 years, 7 years or 8 years. Some European bonds are repaid at one time at maturity, and more often they are paid in stages before maturity.
- For issuers, bonds convertible into stock have two benefits:
- First, because such bonds are attractive to investors, they can be issued at lower interest rates than ordinary bonds.
- Second, once bonds are converted into stocks, not only can they increase their capital and reserves as issuance of shares at the current price, thereby increasing their own capital, but also liquidating foreign currency debts and eliminating foreign exchange risks. The benefit of this convertible bond to investors is that when the stock price and exchange rate rise, convert the bond into stock, and then sell the stock to get more capital gains.
- In addition to the three main types of European bonds mentioned above, there are some other forms of European bonds, such as medium-term European notes, bonds with the right to subscribe to various financial commodities, non-coupon bonds, transferable European currency deposit notes, and European business Notes, floating rate bonds with conversion options, permanent bonds, revolving floating rate bonds, dividend certificate bonds, subordinated credit bonds, high coupon interest conversion corporate bonds, dual currency bonds, etc.
- In the European bond market, all types of currencies are not restricted, but European dollar bonds, European yen bonds, and European West German mark bonds account for a larger proportion.