Chapter 24. The Eurobond Market
MOORAD CHOUDHRY, PhD
Head of Treasury, KBC Financial Products, London
Abstract: The integration and globalization of the world's capital markets has been most evident in the Eurobond market. It is an important source of funds for many banks and corporates, as well as sovereign governments. The Eurobond market has benefited from much of the recent advances in financial engineering, and has undergone innovative changes since its inception in the 1960s. It continues to develop new structures, in response to the varying demands and requirements of specific groups of investors. The range of innovations have customized the market to a certain extent and often the market is the only opening for certain types of government and corporate finance. Investors also often look to the Eurobond market due to constraints in their domestic market, and Euro securities have been designed to reproduce the features of instruments that certain investors may be prohibited from investing in their domestic arena. Other instruments are designed for investors in order to provide tax advantages. The key feature of Eurobonds is the way they are issued, internationally across borders and by an international underwriting syndicate. The method of issuing Eurobonds reflects the cross-border nature of the transaction, and unlike government markets where the auction is the primary issue method, Eurobonds are typically issued under a "fixed price reoffer" method or a "bought deal." There ...