What Are Eurobonds?

What are Eurobonds? Eurobonds are any bonds issued in a currency denomination that is not that of the country where it is being utilized. Often misunderstood by investors, Eurobonds are really foreign bonds or international bonds, as they are not necessarily issued just in Europe or in the currency the Euro (EUR). Like most bonds, Eurobonds pay interest coupon payments to the bearer in addition to the payment of the initial investment amount, its face value. Unlike typical bonds however, these so called international bonds are not monitored via a central system or guaranteed by any government. International bonds are simply as good as their issuer and their particular credit rating. This credit rating is determining factor in how much coupon interest will be paid on foreign bonds. If the credit rating is excellent, AA or better, expect a low interest rate on the bond in exchange for confidence in being reimbursed. Lower credit rated bond issuers will pay higher interest rates but you will be investing in what are known as speculative foreign bonds. Often called junk bonds.

Eurobonds In Use

Eurobonds certainly have their place in the world-wide bond market. For instance many companies utilize these bonds as a way to raise capital from international resources to finance expansion or acquisition projects. In this way a company can avoid using a bank loan and get capital from foreign investors willing to take a chance investing in a foreign country. Eurobonds are listed all over the world informing investors of available interest rates but are primarily traded on the London (FTSE) Stock Exchange. When different foreign currencies are applied to Eurobonds, the name of the bond will take the form of the currency being used to fund the bond.

For example:

In Japan a Eurobond: EuroYen Bond.

If trading US bonds in foreign countries: EuroDollar Bond

What Are Eurobonds?

Eurobonds In Use

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