Features: Bearer Bonds - Anonymous Investors Avoid Taxes? Interest Tax Free (In Case of Withholding Tax, Interest Up)
Features: Bearer Bonds - Anonymous Investors Avoid Taxes? Interest Tax Free (In Case of Withholding Tax, Interest Up)
Features: Bearer Bonds - Anonymous Investors Avoid Taxes? Interest Tax Free (In Case of Withholding Tax, Interest Up)
Eurobonds often trade on an exchange -- most often the London Stock Exchange or the
Luxembourg Stock Exchange -- and they trade much like other bonds. The eurobond market
is considered somewhat less liquid that the traditional bond market, but is still very liquid.
Eurobonds are usually "bearer bonds," meaning that there is no transfer agent that keeps a
list ofbondholders and arranges the interest and principal payments. Instead, holders receive
interest when they present the coupon to the borrower, and receive the principal when the
bond matures and the holder presents the physical bond certificate to the borrower.
either USD or Euro. Eurobonds many not be rated. Hence issuers of the Eurobond
must be reputed enough to attract investors.
Melnik and Nissim ( 2004) report states that In general, the credit quality of
Eurobonds is very high, as most Eurobonds are rated in the AAA to A range. Only
about 5% of the issues receive BBB ratings at the time of issue, and few issues are
ranked BB or below.
Foreign Bond:
Features:
All foreign bonds have to be registered and have to abide by the rules and
regulation of the foreign country where these bonds are issued. For example Yankee
bonds (foreign bonds issued in U.S.) have to be registered with SEC of US and have
to follow the same accounting and disclosure requirement of domestic bonds.
Discuss why Eurobonds make up the lions share of the international bond
market.
Eurobonds make up over 80 percent of the international bond market. The two
major reasons for this stem from the fact that the U.S. dollar is the currency most
frequently sought in international bond financing. First, Eurodollar bonds can be
brought to market more quickly than Yankee bonds because they are not offered to
U.S. investors and thus do not have to meet the strict SEC registration
requirements. Second, Eurobonds are typically bearer bonds that provide anonymity
to the owner and thus allow a means for evading taxes on the interest received.
Because of this feature, investors are generally willing to accept a lower yield on
Eurodollar bonds in comparison to registered Yankee bonds of comparable terms,
where ownership is recorded. For borrowers the lower yield means a lower cost of
debt service.
FOREIGN BONDS
If an Indian company issue
bond in the New-York and
bond is dominated in US
dollar, such Bonds are called
foreign bonds.
Foreign bonds underwritten
by the underwriters of the
country where they issued.
Foreign bonds subjected to
governmental rules and
regulations
EURO BONDS
But in case of euro bonds
they are dominated in
currency other than the
currency of the country
where the bonds are issued.
Euro bonds underwritten by
the underwriters of multi
nationality
Euro bonds are free from
rules and regulations.
Foreign bonds is
determined keeping in mind
the investors of a particular
country .
Foreign
foreign Bond
Domestic
Foreign
Euro bond
Foreign
Domestic
Euro Bonds
Foreign
Bond
GLOBAL BONDS
Bonds that can be offered within the euro market and several other
markets simultaneously .
Unlike Euro bonds, global bonds can be issued in the same currency as
the country of issuance.
For example, a global bond could be both issued in the United States
and denominated in U.S.
dollars.
A bond that may be traded in any domestic or euro market. A global bond may be issued in the domest
ic currency, but the sameissue may be offered in several countries at the same time. Thus, global bonds
may be traded either in domestic or foreign markets.
A BOND that is issued simultaneously in a domestic market and the EUROMARKETS. Global
bonds, which may be fixed or floating rate and carry maturities ranging from 1 to 30 years, are
generally issued by large, wellknown CORPORATIONS or supranational that have international
operations and broad name recognition.
Therefore the interest (income) earned here is the difference between the par value and the
discounted rate at which bondholder buys the security.
Example: If the bondholder purchases a deep-discount bond of par value Rs.1000 at Rs. 860, then
the interest earned during redemption is Rs. 140 (Rs. 1000 Rs. 860).