International Bond Market Overview
There is no single
international bond market as such. The international bond market is divided into three separate types of bond markets. These divisions are the domestic bonds, the foreign bonds and the Eurobonds.
Domestic Bonds
The market for domestic bonds is a part of the international bond market. The domestic bonds are brought out on a local basis. The domestic borrowers are responsible for issuing the local bonds. The domestic bonds are normally designated in the local currency.
Foreign Bonds
The foreign bond market is yet another type of international bond market. The foreign bonds are brought out by foreign borrowers. The foreign bonds are normally designated in the local currency. The local market authorities look after the issuing and selling of foreign bonds.
Foreign Bond Markets
The foreign bonds are traded in the foreign bond markets. These markets constituted a significant portion of the international bond market till a few decades ago. Following were some defining characteristics of the foreign bond markets:
- Issuers were normally foreign governments and private sector utilities like the railway companies
- It was standard practice to underwrite as well as organize underwriting risk
- Issues were pledged by the retail investors and the institutional investors
- The structure of a foreign bond at that time is similar to the present day foreign bonds
- Continental private banks and old merchant houses in London connected the investors and the issuers
Eurobonds
The Eurobonds are not sold in any particular national bond market. The Eurobonds are issued by a group of multinational banks. If a Eurobond is designated in any currency, it would be sold outside the country, that has the specific currency.
For example if a Eurobond is denominated in the United States dollar, it would not be sold in the United States.
Euromarket
The Euromarket is the market where Eurobonds are traded apart from the Eurocurrency, Euronotes, Eurocommercial Papers, and Euroequity. The Euromarket is normally an offshore market. The traders of bonds prefer the Eurobond market, as it has comparatively lesser costs and regulations.