Euro bonds and International bonds
Debt investments that are issued in a country by a non-domestic entity. International bonds are issued in countries outside the United States, in their native country's currency. They pay interest at specific intervals, and pay the principal amount back to the bond's buyer at maturity.
International bonds include eurobonds, foreign bonds and global bonds. A different type of international bond is the Brady bond, which is issued in U.S. currency. Brady bonds are issued in order to help developing countries better manage their international debt. International bonds are also private corporate bonds issued by companies in foreign countries, and many mutual ...view middle of the document...
Instead, holders receive interest when they present the coupon to the borrower, and receive the principal when the bond matures and the holder presents the physical bond certificate to the borrower.
Like other bonds, eurobonds obligate the borrower to pay a certain interest rate and principal amount according to the terms of the indenture. However, eurobonds often pay interest annually rather than semiannually, like U.S. corporate bonds.
The less-frequent coupons make eurobonds somewhat less valuable -- and thus require higher yields -- than traditional U.S. corporate bonds. Even if both investors receive the same amount of interest every year, the difference in payment frequency means that investors should compare eurobonds to other bonds very carefully.
Why it Matters:
Eurobonds give issuers the opportunity to take advantage of favorable regulatory and lending conditions in other countries. Eurobonds are not usually subject to taxes or regulations of any one government, which can make it cheaper to borrow in the Eurobond market as compared to other debt markets.
Borrowing in foreign currencies also present risks in addition to the standard credit risk and interest rate risks. Eurobonds are exposed to exchange rate risk, and because exchange rates can change quickly and dramatically, the total return on a Eurobond can be affected dramatically in a very short amount of time.
Brady Bond –
Brady bonds are U.S. Treasury bonds issued by developing countries in an effort to reduce these countries’ external debt.
How it works/Example:
Named for former U.S. Treasury Secretary Nicholas Brady, Brady bonds were introduced in the late 1980s as part of Brady's initiative to reduce the high debt obligations of emerging economies once they began defaulting on bonds issued by their respective governments.
Each Brady bond is denominated in U.S. Dollars and...