Eurobond-what is eurobond?
Eurobond (Euro bond) is the face value of national currency is not the issue local currency bonds. Bonds not subject to any European country's capital market restrictions, withholding tax-free, the denomination of the currency can be issued by local or other currency as the unit. Multinational group of companies and Third World governments, European bonds are an important channel for their financing.
Traditional European bonds have a direct bond (straight bond), convertible bonds (convertible bond), stock option certificates with non-convertible bonds (straight bond with warrant) and floating rate promissory notes (floating rate notes) and so on. In addition, there are multi-currency Eurobonds (multcurrency) and the use of accounting units (unit of account) bonds issued in two ways. The former, although the face value of the single currency, but investors can select a currency from several repayment; the latter refers to the ECU (European currency unit), the European combined unit (Eurco), associated with the Arab currency unit (Arcru ) and Special Drawing Rights (SDR) unit of account and other bonds issued. European bonds also issued an anonymous way, but if the borrower is not allowed to release, the bank can be issued in consultation with the handling, from which the issue of bearer securities deposit receipts (bearer depositary receipt).
Europe is a government bond, financial institutions, business enterprises or international organizations in foreign bond markets to third country currency denominated bonds. For example, a French institution in the UK bond market, issuance of U.S. dollar-denominated bonds from the European bonds. European bond issuers, and the face value of the currency issued to belong to three different countries.
Coupon bonds, in addition to the European currency with a single currency, but also can be integrated currency issue, such as Special Drawing Rights, the European Monetary System unit of account, etc. Eurobonds scope of each issue can be in several countries.
The reason why the European bond investors and issuers have so much charm, mainly the following reasons:
First, the European bond market is a completely free market, bond issuance is more freedom and flexibility, it does not require registration to any supervisory authority, nor the amount of interest rate controls and distribution restrictions, you can also choose a variety denomination.
Second, the issue of the European bond to raise large sums of money, a long time, but also for the financial disclosure requirements to European bonds is not high, easy to fund-raisers to raise funds.
Third, European bonds usually by a few large multinational financial institution issued, issue a wide range, simplicity, distribution costs are lower.
Fourth, the European bond interest income is usually exempt from income tax.
Fifth, the European bonds issued in bearer form, and can be saved in foreign countries, some hope for a confidential investor needs.
Sixth, European security, and higher yields than bonds. European bonds were mostly large companies, governments and international organizations, they generally have very high credibility for investors is more reliable. Meanwhile, the European bond yields higher.
European bonds reliable and high rate of return
European bond markets are the main fund-raisers large companies, governments and international organizations, these fund-raisers in general have a high reputation, and each time bonds are subject to the government, large corporations or bank guarantee, so investors is relatively safe and reliable, and European bonds and domestic bond yields higher than its.
The types and monetary selective bond
Can be issued in the Eurobond market, many types, duration, different currencies of the bonds, thus financing are based on exchange rates of various currencies, interest rates and the need to select the appropriate Eurobond issue. Bond investors can gain a variety of circumstances, to choose a particular level of risk or certain kinds of bonds.
European bonds reliable and high rate of return
European bond liquidity, easy cash
Europe more active secondary market for bonds and operating efficiency, allowing for easier transfer of bonds, the bondholders to obtain cash.
European bonds exempt from taxes and anonymous
European interest on the bonds is usually exempt from income tax or advance tax deduction borrowers. Other European bonds are issued in bearer form and can be saved in a foreign country, so easy to evade domestic income investors.
European bond market capacity and the freedom and flexibility
European bond market is a non-interest rate controls, no restrictions on the amount of free-market issue, and the issuance costs and interest costs are lower, it does not require official approval, not too many limits, so its appeal is very large, can meet the national governments, multinational corporations and international organizations, a variety of financing requirements.
Eurobond history:
European bonds produced in the 1960s, with the formation of the European money markets and the rise of an international bond. 60 years later, the U.S. continued outflow of capital, the U.S. government was forced to take a series of restrictive measures. July 1963, the U.S. government began to impose "interest balancing tax" to provide U.S. residents to buy foreign bonds issued in the United States, all interest earned to pay taxes. In 1965, the U.S. government has issued regulations requiring banks and other financial institutions to limit the amount of loans to foreign borrowers. These two measures make it difficult for foreign borrowers in U.S. dollar bonds issued or to obtain dollar loans. On the other hand, in the 1960s, many countries have a large surplus dollars, need to get into the loan market interest rates, so, some European countries outside the United States began to issue dollar bonds, which is the origin of European bonds.
The first major European bonds denominated in U.S. dollars, issue of the European-based. 70 years later, with the dollar exchange rate volatility increases, the German mark, Swiss franc and yen-denominated bonds, the proportion of the European currency gradually increased. Meanwhile, the issue began to break through the geographical limits of Europe, Asia-Pacific, North America and Latin America and other European bond issuance increasing. European bonds since its inception, has developed very rapidly. 1992 bond issuance of $ 276.1 billion, issuance volume in 1996 increased to $ 591.6 billion in the international bond market, the European bond far exceeds the proportion of foreign bonds.
