Eurobonds (External Bonds)

Definition

The term Eurobond refers to an international indenture issued in a non-domestic currency.  Eurobonds allow issuers to raise funds, while selecting the country to offer their bond based on that country's regulatory environment.

Explanation

Also known simply as an external bond, a Eurobond is any internationally issued bond that carries a non-domestic denomination.  For example, a Eurodollar bond refers to a dollar denominated indenture issued outside of the United States.   In the same way, the Euroyen refers to a yen denominated indenture issued outside of Japan.  Other examples include the Eurosterling, EuroAustralian dollar, EuroFrench franc, and the Eurodeutsche mark.

There are four types of Eurodebt, including "straight" debt, convertibles, currency option, and floating rate notes.  Nearly all Eurobonds are offered as fixed rate securities.

Eurobonds provide issuers with the option to select the country that will offer their bonds based on the regulations specific to that country, which will provide the issuer with an advantage relative to their domestic regulations.

Related Terms

Formosa bond, Uridashi bond, shogun bond, shibosai bond