Covered Bonds
February 12, 2025
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The Eurobond market is one of the largest debt markets in the world. It comprises a large portion of the debt which is issued by multinational companies as well as governments. It is therefore important for any student of fixed income securities to be aware of what Eurobonds are.
The fact that these bonds are called “Euro bonds” can be quite confusing to many investors. This is because a lot of these bonds are not necessarily originate in Europe, by European countries. Most of these bonds are not even denominated in the currency Euro. However, for many years, these bonds have been called Eurobonds. As a result, they are now referred to by that name even though governments of the European Union are planning to change that in the near future.
In this article, we will have a closer look at what the Eurobond market is and how it works.
In order to understand the Eurobond market, we first need to understand what a domestic bond issue, as well as a foreign bond issue, is.
When the issuer taps such funds, they are said to be dealing in the Euromarkets. Hence, Eurobonds are issued by a foreign company, in a different country and are denominated in a third currency! An example would be a British company borrowing United States dollars in the Amsterdam markets. Notice that the issuer, the investor, and the country are all different.
Now that we are aware of what Eurobonds are, the next question is about why do such bonds exist? Some of the benefits of issuing these bonds have been explained below:
The fact of the matter is that Eurobonds are an extremely large and liquid type of debt market. Almost every major country, as well as corporation around the world, has some exposure to the Eurobond market.
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