International Bond Market Chapter 12

Study Notes

Foreign Bonds and Eurobonds

Foreign bonds can be bearer bonds or registered bonds and may involve national security registrations and withholding taxes.
Recent regulatory changes have impacted how global bonds are issued and maintained.

Bearer Bond and Registered Bond

Bearer bonds do not have a registered owner, providing anonymity but with high risk of loss similar to cash.
Registered bonds have the owner's identity recorded, offering more security against loss.

Global Bond

Defined as an international bond offering by a single borrower, sold simultaneously in North America, Europe, and Asia.

Types of Instruments

Various types include:
- Straight fixed-rate debt
- Floating-rate notes
- Equity-related bonds (convertible bonds and bonds with equity warrants)
- Zero-coupon bonds
- Dual-currency bonds
- Composite currency bonds

Comprises convertible bonds and bonds equipped with equity warrants, linking investments directly to company equities.

Convertible Bond

Allows investors to exchange the bond for a pre-defined number of equity shares of the issuer, adding potential upside linked to company performance.

Bond with Equity Warrant

Provides the bondholder the right to purchase a specified number of shares at a predetermined price while retaining the bond.

Zero-coupon Bond

Issued at a steep discount compared to face value, offering no cash flow until maturity, appealing to long-term investors.

Dual-Currency Bond

A fixed-rate bond where interest payments are made in one currency and principal is repaid in another, facilitating cross-border investment.

Eurobond Market Structure

Comprises a primary market for new issuances, a secondary market for trading existing bonds, and well-defined clearing procedures.

Lead Manager

The entity or individual within the underwriting syndicate tasked with bringing the bonds to market, crucial for coordination and success.

Underwriting Syndicate

A collaboration of various banks that specializes in different phases of a public bond issuance, pooling resources and expertise.

Managing Group

This group negotiates terms with the borrower, assesses market conditions, and manages the overall issuance process, ensuring effective execution.

Market Maker

An individual ready to buy or sell securities, providing liquidity in the market by quoting both bid and ask prices.

Clearing Procedure

Involves efficient systems for transaction processing, where physical bond transfers are rare, enhancing speed and reliability in trade settlements.

Description

Dive into the essentials of the International Bond Market with this quiz based on Chapter 12. Explore key concepts such as foreign bonds, Eurobonds, bearer bonds, and registered bonds, along with recent regulatory changes and withholding taxes. A must for finance enthusiasts!