What’s a global bond?
A global bond, or Eurobond, is issued and traded beyond the country where the currency is denominated.
Understanding Global Bonds
Multinational enterprises and sovereign bodies may issue global bonds to raise enormous amounts of finance. Global bonds are multinational bonds sold concurrently in financial markets throughout Europe, Asia, and America. Bonds can have fixed or adjustable rates and maturities ranging from one to 30 years.
For example, Japanese corporations use the yen, and German companies use the euro to denominate their worldwide bonds. Other global bonds use the country’s currency. In the previous example, a U.S. company may sell a yen-denominated bond in Japan.
Foreign fixed-income investments offer moderate yields and fluctuate modestly due to exchange rate fluctuations. Global bonds can diversify a portfolio without a single denomination or country’s bond, such as a U.S. bond, because they correlate less to international fixed-income bonds.
Global bond categories include developed nation bonds and developing market bonds. Corporations and governments in developed nations issue bonds with different maturities and credit ratings. Some bonds use U.S. dollars. However, the majority use their national currencies.
Sovereign governments, not firms, often issue emerging market bonds. These dollar-denominated bonds have high interest rates due to the perceived danger of investing in an economically unstable country.
Eurobond vs. Global Bond
Although often referred to as Eurobonds, global bonds have unique characteristics. Eurobonds are international bonds issued and traded outside their denominated country. These bonds use a currency other than the issuer’s.
A French business that issues U.S. dollar bonds in Japan launched a Eurobond or Eurodollar bond. Other Eurobonds are Euroyen and Euroswiss.
Global bonds are like Eurobonds but may be traded and issued concurrently in the nation whose currency values them. Using our Eurobond example, a global bond is one in which a French business issues U.S. dollar bonds in Japan and the U.S.
Conclusion
- Global bonds, or Eurobonds, are issued and traded beyond the country where their currency is denominated.
- Global bonds have one- to 30-year maturities and fixed or adjustable rates.
- Emerging markets and developed-nation bonds make up global bonds.
