International Bonds

<body onLoad="MM_checkPlugin('Shockwave Flash','','http://www.riskglossary.com/default_nofl.htm',false);return document.MM_returnValue" stylesrc="../_private/template.htm" bgcolor="#FFFFFF" link="#669933" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table1"> <tr> <td width="740"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" height="37" id="table2"> <tr> <td height="35" width="100%"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table3"> <tr> <td width="100%" align="left" valign="top"> <p class="header_gold">International Bonds</td> <td width="45" align="right" valign="bottom"> <map name="FPMap6"> <area href="http://www.contingencyanalysis.com" shape="rect" coords="1, 0, 44, 11" target="_top"> </map> <img border="0" src="../images/home.gif" usemap="#FPMap6" width="45" height="12"></td> </tr> </table> </td> </tr> <tr> <td width="100%" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td width="0%" valign="top" bgcolor="#FFFFCC"> <table border="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" cellspacing="1" id="table4"> <tr> <td width="0%" align="left" valign="top"> <p class="header2_black">Explained:<br> <img border="0" src="../images/blank_1x100.gif" width="100" height="1"></td> <td width="0%" align="left" valign="top"><p class="word_list"> <a href="#Bulldogs">bulldog</a><p class="word_list"> <a href="#domestic bonds">domestic bond</a><p class="word_list"> <a href="#Emerging market debt">emerging market debt</a><p class="word_list"> <a href="#Eurobond">Eurobond</a><p class="word_list"> <a href="#foreign bonds">foreign bond</a><br> <img border="0" src="../images/blank_1x160.gif" width="160" height="1"></td> <td width="100%" align="left" valign="top"><p class="word_list"> <a href="#global bonds">global bond</a><p class="word_list"> <a href="#Matadors">matador</a><p class="word_list"> <a href="#Rembrandts">Rembrandt</a><p class="word_list"> <a href="#Samurais">samurai</a><p class="word_list"> <a href="#Yankee bonds">Yankee bond</a><br> <img border="0" src="../images/blank_1x160.gif" width="160" height="1"></td> </tr> </table> </td> </tr> </table> <table border="0" cellpadding="0" style="border-collapse: collapse" bordercolor="#111111" width="310" align="left" id="table5"> <tr> <td width="300" height="14"><font size="2"> </font><font size="4"> </font></td> <td width="9" height="14"></td> </tr> <tr> <td width="300"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script>  </td> <td width="9"> </td> </tr> </table> <p class="body">Cross-boarder <a href="../articles/coupon_bond.htm">bond</a> investing has existed for centuries. There was little activity for much of the 20th century, due to <a href="../articles/capital_allocation.htm"> capital</a> and currency controls, but the 1973 collapse of the Bretton Woods system opened the door for the emergence of today's active markets. This article describes the types of instruments that are traded. </p> <p class="body">Most countries have some system of financial regulation that applies to securities issued for sale to domestic investors (see articles on <a href="../articles/united_states_financial_regulation.htm"> United States</a> and <a href="../articles/european_financial_regulation.htm">European</a> regulations). <b><a name="domestic bonds">Domestic bonds</a></b> are issued in a country by a domestic issuer for domestic investors. They are denominated in that country's currency and are subject to that country's regulations. Some investors purchase another country's domestic bonds. To do so effectively, they must understand that country's trading, settlement and accounting practices. They may have to deal with inconvenient time-zone and language differences. The bonds pose foreign exchange risk, and securing reliable <a href="../articles/credit_risk.htm">credit</a> information can be difficult.</p> <p class="body">Some bond issuers explicitly want to attract foreign investors. They issue what are known as <b><a name="foreign bonds">foreign bonds</a></b>. These are bonds issued in one country and denominated in that country's currency by a foreign issuer. The issuer must satisfy all regulations of the country in which it issues the bonds. An example is <b> <a name="Yankee bonds">Yankee bonds</a></b>, which are foreign bonds sold by some <a href="../articles/corporation.htm">corporations</a>, but mostly by supranational agencies or foreign governments, to investors in the United States. <b><a name="Bulldogs">Bulldogs</a></b>, <b> <a name="Matadors">matadors</a></b>, <b><a name="Rembrandts">Rembrandts</a></b>, and <b><a name="Samurais">samurais</a></b> are foreign bonds issued in the United Kingdom, Spain, the Netherlands and Japan, respectively.</p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="345" align="right" id="table6"> <tr> <td align="right" width="9"> </td> <td width="336"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script>  </td> </tr> </table> <p class="body">A <b><a name="Eurobond">Eurobond</a></b> is something different. It is not a foreign bond issued within the European Union. Rather, it is a bond issued and traded within the mostly unregulated Euromarket. While that market originated within Europe—and is still largely centered there—it is a truly international market. Transactions are not subject to any particular nation's regulations. Bonds are issued in <a href="../articles/book_entry_registered_bearer_bonds.htm">bearer form</a> and usually pay annual (as opposed to semiannual) <a href="../articles/coupon_bond.htm">coupons</a>. They are denominated in various currencies. Since the launch of the euro in 1999, many European corporations have turned to the Eurobond market to diversify their funding away from bank loans. In this way, the Eurobond market has become both an international market and somewhat of an unregulated domestic bond market for Europe.</p> <p class="body"><a href="../articles/arbitrage.htm">Arbitrage</a> between the foreign bond and Eurobond markets lead to the development of <b> <a name="global bonds">global bonds</a></b>. These are bonds that blend characteristics of foreign bonds and Eurobonds and are issued in both markets simultaneously.</p> <p class="body"><b><a name="Emerging market debt">Emerging market debt</a></b> is debt that is issued by governments or corporations in countries whose economies are striving to emerge from under development. The sector includes domestic bonds, but foreign investors primarily buy bonds issued as Eurobonds or global bonds. <a href="../articles/credit_risk.htm">Credit risk</a> is a significant issue, and many outstanding bonds are restructured bank loans or restructured defaulted bonds. </p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table7"> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Related Internal Links</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table8"> <tr> <td width="100%"> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/agency_securities.htm">agency security</a> A security issued by a US federal agency or government sponsored enterprise.</p> <p align="left" class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/coupon_bond.htm">bond</a> Securitized debt.</p> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/book_entry_registered_bearer_bonds.htm">book-entry, registered and bearer bonds</a> Three forms of bonds differing in how ownership is evidenced.<p align="left" class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/corporate_bond.htm">corporate bond</a> A bond issued by a corporation.</strong></p> <p align="left" class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/credit_risk.htm">credit risk</a> Risk</strong> due to uncertainty in a counterparty's ability to meet its obligations.</p> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/interest_rate_swap.htm">interest rate swap</a> A swap under which both cash flow streams are in the same currency and are of a nature that might be associated with some fixed income obligation.<p align="left" class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/junk_bond.htm">junk bond</a> A bond whose credit rating is below BBB-.</strong><cop yrigh t( c)c ont i ngen cy anal y sis, 2 00 5><p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/medium_term_note.htm">medium-term note</a> A debt security issued through shelf-registration under US law.</strong></p> <p align="left" class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><span class="verdana10"><a href="../articles/mortgage_backed_security.htm"><strong style="font-weight: 400">mortgage backed security</strong></a></span><strong style="font-weight: 400"> A security interest in mortgage collateral.</strong></p> <p align="left" class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/municipal_securities.htm">municipal security</a> A debt security issued by a local government or its agencies or authorities in the United States or its territories.</strong></p> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/securitization.htm">securitization</a> The process of pooling assets and selling interests in the pool to investors.<p align="left" class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><strong style="font-weight: 400"><a href="../articles/syndicated_loan.htm">syndicated loan</a> A loan made collectively by a group of lenders to a single borrower.</strong></p> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/treasury_securities.htm">Treasury security</a> US Federal Government debt obligation issued by the Department of Treasury.</p> <p class="explanatory_text"> <img border="0" src="../images/bullet_link_glossary.gif" width="26" height="15"><a href="../articles/zero_coupon_bond.htm">zero-coupon bond</a> A bond that pays no coupons, pays its par value at maturity and is issued at a discount.</td> </tr> </table> </td> </tr> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Sponsored Links</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" width="75"> <img border="0" src="../images/ad_side_banner_2.jpg" width="103" height="285"></td> <td bgcolor="#FFFFCC" width="99%"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script>  </td> </tr> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Related Books</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table9"> <tr> <td width="100%"> <p class="explanatory_text">Fabozzi (<a target="_blank" href="http://www.riskbook.com/link/fabozzi_frank_(2000).htm">2005</a>) is the standard reference on bonds.</p> <table border="0" cellpadding="4" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table10"> <tr> <td width="100" align="left" valign="top"> <map name="FPMap591"> <area target="_blank" href="http://www.riskbook.com/link/fabozzi_frank_(2000).htm" shape="rect" coords="0, 0, 83, 124"> </map> <img border="0" src="../images/book_fabozzi_f_(2000)_125.gif" usemap="#FPMap591" width="84" height="125"></td> <td align="left" valign="top"> <table border="0" cellpadding="1" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table11"> <tr> <td width="90%" colspan="3"> <p class="title"> <a target="_blank" href="http://www.riskbook.com/link/fabozzi_frank_(2000).htm"> Handbook of Fixed Income Securities</a></td> </tr> <tr> <td colspan="3"> <p class="author"><b>Frank J. Fabozzi</b></td> </tr> <tr> <td width="10%"> <map name="FPMap588"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/star_5.gif" usemap="#FPMap588" width="90" height="16"></td> <td width="10%" class="author">quality</td> <td width="70%"> <p class="author"> </td> </tr> <tr> <td width="10%"><map name="FPMap589"> <area target="_blank" href="http://www.riskbook.com/main/ratings.htm" shape="rect" coords="0, 0, 89, 15"> </map> <img border="0" src="../images/tech_2.gif" usemap="#FPMap589" width="90" height="16"></td> <td width="10%" class="author">technical</td> <td width="70%">  </td> </tr> <tr> <td width="10%"> <p class="author">2005</td> <td width="10%"> </td> <td width="70%"> <p align="center"><map name="FPMap590"> <area target="_blank" coords="0, 0, 145, 19" shape="rect" href="http://www.riskbook.com/link/fabozzi_frank_(2000).htm"> </map> <img border="0" src="../images/pointer_review.gif" usemap="#FPMap590" width="146" height="20"></td> </tr> </table> </td> </tr> </table> </td> </tr> </table> </td> </tr> <tr> <td height="30" valign="bottom" colspan="2"> <p class="header2_black">Sponsored Links</td> </tr> <tr> <td colspan="2" bgcolor="#CC9966" height="2"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> </tr> <tr> <td bgcolor="#FFFFCC" width="75"> <img border="0" src="../images/ad_side_banner_1.jpg" width="103" height="285"></td> <td bgcolor="#FFFFCC" width="99%">  <p class="ad_legend" style="margin-left: 0; margin-bottom:2"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font color="#000000">Ads by Contingency Analysis</font></a></p> <p style="margin-top: 0; margin-bottom: 0"> <iframe src="http://servedbyadbutler.com/adserve/;ID=147917;size=336x265;setID=82436;type=iframe" style="margin: 0px; padding: 0px; border-width: 0px" width="336" height="265" frameborder="0" marginwidth="0" marginheight="0" scrolling="no" name="I1"> <![if lt IE 4]> <script src="http://servedbyadbutler.com/adserve/;ID=147917;size=336x265;setID=82436;type=js" type="text/javascript"> </script> <noscript> <a href="http://servedbyadbutler.com/go2/;ID=147917;size=336x265;setID=82436"> <img src="http://servedbyadbutler.com/adserve.ibs/;ID=147917;size=336x265;setID=82436;type=img" border="0" height="265" width="336" alt=""></a> </noscript><![endif]></iframe>   </td> </tr> <tr> <td bgcolor="#FFFFCC" colspan="2"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="6" id="table12"> <tr> <td width="100%" bgcolor="#FFFFFF"> <p align="center" style="margin-top: 18"><map name="FPMap365"> <area target="_top" href="http://www.riskglossary.com" shape="rect" coords="0, 0, 164, 102"> </map><img border="0" src="../images/logo.jpg" usemap="#FPMap365" width="165" height="103"></p> <p align="center"><span class="verdana10"> <a href="http://www.riskglossary.com/main/disclaimer.htm" target="_self"> Disclaimer</a></span></p> <p align="center">website: <span class="verdana10"> <a target="_top" href="http://www.contingencyanalysis.com"> http://www.contingencyanalysis.com</a></span><br> glossary direct link: <span class="verdana10"> <a target="_top" href="http://www.riskglossary.com"> http://www.riskglossary.com</a></span><br> copyright © Contingency Analysis, 2006<p align="center"><map name="FPMap1"> <area target="_top" href="http://www.contingencyanalysis.com" shape="rect" coords="0, 0, 240, 88"> </map><img border="0" src="../images/logo_glossary_white.gif" usemap="#FPMap1" width="241" height="89"></td> </tr> </table> </td> </tr> </table> </td> <td>  </td> </tr> </table> </div> </body>