What is a Eurobond?

A Eurobond is a generally unsecured, unsubordinated intermediate- to long-term coupon-bearing Euromarket debt instrument ordinarily issued in bearer form on a “one-off basis” and underwritten by an international syndicate of commercial and investment banks through a tender panel.  They frequently have maturities of three, five, seven and ten years, although USD issues of thirty years and longer are not uncommon.  While Eurobonds are issued principally in USD and EUR, there is also significant activity in GBP, JPY, CHF and AUD.

Eurobonds may be issued on a one-off basis or under an MTN program.  Whereas Eurobond issues may be made under EMTN documentation to ease execution, they are distinguished from EMTNs by the fact that they are underwritten.  Like EMTNs, Eurobonds are commonly listed on either the London or the Luxembourg stock exchanges; if not listed, they are private placements.

Since most Eurobonds are unsecured obligations, generally only issuers with a high credit rating, such as governments, supranational entities and top multinational corporations, can access this market.  Virtually all issuers require a rating before coming to the Euromarket, particularly if they want to return in the future or if they need large or long-dated funding.

A bond issue sold in both the Euromarket and the issuer’s domestic market at the same time, with securities being fungible between the markets, is a global bond.  Global bonds generally follow domestic US market requirements.  Many “globals” from the largest issuers are structured as USD bonds that are simultaneously sold and traded in the US and Euromarkets.

Foreign issuers wishing to market their bonds simultaneously in the US and in other countries must first register them with the US Securities and Exchange Commission (SEC), the US securities market regulator.  Eurobonds are frequently registered with the SEC in order to offer them simultaneously to the public in the domestic US market and outside the US market.  The SEC prohibits the offering of newly-issued Eurobonds to the general US investing public until they have been “seasoned” for a period of at least 40 days.

A Eurobond issue that is sold only in a given foreign market, denominated in that market’s currency and subject to the same market regulations that apply to domestic bonds, is a foreign bond.  Foreign bonds are typically managed and underwritten by a national underwriting and selling group of the lender’s home country.  Foreign bonds issued in the United States are called Yankee bonds, chiefly by issuers with significant operations in the United States, especially those that use USD denominated long-term funding as a balance sheet hedge.  Bulldogs is the term for foreign bonds issued in the United Kingdom, Matadors are foreign bonds issued in the Spanish domestic market by non-Spanish issuers, Rembrandts are foreign bonds issued in Holland, and Samurais are foreign bonds issued in Japan.