Global Bond
A global bond, sometimes referred to as a Eurobond, is a type of bond issued and traded outside the country where the currency of the bond is denominated.
Global Bonds
Definition
Global bonds, sometimes referred to as Eurobonds, are bonds issued and traded outside the country whose currency is used to denominate the bond. This means that global bonds can be traded in multiple countries' markets without being restricted to the issuing country.
Origin
The concept of global bonds originated in the 1960s when the Eurobond market began to emerge. The earliest issuance of global bonds can be traced back to 1963 when the Italian government issued a batch of dollar-denominated bonds that were traded in the European market. This event marked the birth of the global bond market.
Categories and Characteristics
Global bonds can be classified based on the issuer, currency type, and market region:
- Issuer: Governments, corporations, and international organizations can issue global bonds.
- Currency Type: Global bonds can be denominated in any major currency, such as USD, EUR, JPY, etc.
- Market Region: Global bonds can be traded in multiple countries' markets, such as Europe, Asia, and the Americas.
The main characteristics of global bonds include:
- Diversity: Investors can choose bonds from different currencies and markets, diversifying investment risks.
- Liquidity: Due to trading in multiple markets, global bonds usually have high liquidity.
- Exchange Rate Risk: Since multiple currencies are involved, investors need to consider the risks brought by exchange rate fluctuations.
Specific Cases
Case 1: A multinational corporation issued a batch of dollar-denominated global bonds in the European market. These bonds attracted investors from Europe, Asia, and the Americas, helping the company raise significant funds for business expansion.
Case 2: A government issued a batch of euro-denominated global bonds in the international market for infrastructure construction. These bonds were traded in multiple markets, enhancing the government's financing capability.
Common Questions
Question 1: What is the difference between global bonds and domestic bonds?
Answer: Global bonds are traded in multiple countries' markets, while domestic bonds are only traded in the issuing country's market.
Question 2: What should investors pay attention to when investing in global bonds?
Answer: Investors need to pay attention to exchange rate risk, market liquidity, and the credit risk of the issuer.
