International Bonds

What are International Bonds?

International bonds are debt instruments that are issued by a non-domestic company in order to raise money from international investors and are usually denominated in the currency of the issuing country with the primary objective of attracting more investors on a large scale.

Types of International Bonds

Types of International Bonds

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#1 – Eurobond

The first type of international bond is simply a bondBondA bond is financial instrument that denotes the debt owed by the issuer to the bondholder. Issuer is liable to pay the coupon (an interest) on the same. These are also negotiable and the interest can be paid monthly, quarterly, half-yearly or even annually whichever is agreed mutually.read more that is denominated in a different currency than the domestic currency of the country or market in which it is issued. It doesn’t have to be denominated in EUR. Eurobonds can have the following differences between the issuer, denomination, and the country in which it is being issued:

  1. Issuer (Issuing company’s nationality)
  2. Bond’s Denomination (currency)
  3. The country in which it is being issued

An example would be a Spanish Bank (A) issuing a Japanese yen-denominate bond (B) in London (C).

#2 – Foreign Bond

A Foreign Bond is a bond that is issued in a domestic market in domestic currency by a Foreign Entity. Foreign bonds can have the following differences between the issuer, denomination, and the country in which it is being issued:

  1. Issuer (Issuing company’s nationality)
  2. The country in which it is being issued

The denomination of the bond will be Country B’s currency. An example would be a French Company (A) issuing a US dollar bond in the US.

#3 – Global Bond

The third type of international bond is a bond that is issued by a foreign investor in a different currency other than the home currency and is also being issued in a market for which the currency is domestic simultaneously. Global bonds can have the following differences between the issuer, denomination, and the country in which it is being issued:

  1. Issuer (Issuing company’s nationality)
  2. What is the denomination of bonds (currency), and for which country this currency is local?
  3. The country in which it is being issued

An example would be an Australian Bank (A) issuing a GBP Bond (B’s currency) in London (B’s country) and in Japan (C).

International-Bonds

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Advantages of International Bonds

Disadvantages of International Bonds

Conclusion

International bonds are very much suitable for diversifying the portfolio at the international scale, gaining exposure to foreign securities, high returns, and if the investor wants to hedge his exposure in a foreign economy. But at the same time, International bonds bring up currency and country-specific risks. Also, Investor has to be aware of international market concerns as well as geopolitical and economic risksEconomic RisksEconomic Risk is the risk exposure of an investment made domestically or abroad. These risks could be macroeconomic factors like government policies or collapse of the current government and major swing in the exchange rates.read more before investing in such bonds.

This has a guide to What are International Bonds and its Definition. Here we discuss the international bond types along with characteristics, advantages, and disadvantages. You can learn more about from the following articles –

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