Series 7: 2.10.4 Eurobonds And Eurodollar Bonds

2.10.4  Eurobonds and Eurodollar Bonds

Eurobonds are a type of international bond and are unique primarily in the way they are issued. A Eurobond is denominated in a currency other than that of the country where it is issued (sold) or where the company is headquartered.

Typically issued by multinational corporations and national governments, Eurobonds are underwritten by foreign banks or broker-dealers and typically sold to the market in which a bond is denominated (but this is not a requirement). For instance, bonds may be issued and sold in Britain by a Kuwaiti company and denominated in the pound. The Eurobond is denominated in the currency in which the principal and interest will be paid.

Issuers of Eurobonds can choose to issue the bond in a country with the fewest regulatory constraints and in a currency most acceptable to the international market. Eurobonds are sometimes bearer bonds and thus can provide anonymity to the owners and allow them to avoid paying taxes on the interest they receive. Issuers can therefore offer these bearer bonds at an even lower yield.

Eurodollar bonds are Eurobonds denominated in U.S. dollars, meaning that the interest and principal will be paid in U.S. dollars, but the bonds will be sold outside the U.S. Since Eurodollar bonds are not offered to U.S. investors or issued on its shores, they do not have to meet SEC registration requirements, and the bondholders are not subject to U.S. taxes.

Yankee bonds are U.S. dollar denominated bonds issued in the U.S. by a foreign issuer. Yankee bonds may be issued by foreign governments, but more often they are issued by corporation