Glossary term
Eurobond
A eurobond is a bond issued outside the country or market of the currency in which it is denominated.
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What Is a Eurobond?
A eurobond is a bond issued outside the country or market of the currency in which the bond is denominated. The name does not mean the bond must be issued in euros or in Europe.
For example, a U.S. dollar-denominated bond issued outside the United States may be called a Eurodollar bond. A yen-denominated bond issued outside Japan may be called a Euroyen bond. The defining feature is the cross-border currency and issuance context.
Key Takeaways
- A eurobond is issued outside the home market of its currency.
- Eurobonds can be denominated in dollars, euros, yen, Swiss francs, or other currencies.
- Issuers may use eurobonds to access international investors or diversify funding.
- Investors should consider currency, credit, liquidity, tax, and legal risks.
- The term is different from Eurozone government bonds or bonds denominated only in euros.
How Eurobonds Work
A corporation, government, bank, or supranational issuer sells bonds to international investors in a chosen currency. The bonds pay interest and principal according to the offering terms. They may be listed on an exchange, sold through underwriters, or held by institutional investors.
Eurobonds can help issuers match borrowing currency to revenue, broaden the investor base, or access markets where demand is stronger. Investors may use them to gain exposure to foreign issuers or specific currencies.
The structure can vary. Some eurobonds are fixed-rate, some floating-rate, some senior, some subordinated, and some issued under programs that allow repeated offerings. The legal documents, governing law, and settlement system matter.
Eurobond Compared With Similar Terms
Term | Meaning | Common confusion |
|---|---|---|
Eurobond | Bond issued outside the home market of its currency | Not necessarily euro-denominated |
Eurodollar bond | Dollar bond issued outside the United States | A type of eurobond |
Foreign bond | Bond issued in a local market by a foreign borrower | Different market convention |
Eurozone bond | Bond from a country or issuer in the euro area | Geographic, not the same concept |
Limits and Misunderstandings
The biggest misunderstanding is the word euro. A eurobond can be denominated in many currencies, and a euro-denominated bond is not automatically a eurobond.
Eurobonds also are not automatically safer because they are international. Investors still need to evaluate issuer credit, currency exposure, interest-rate risk, liquidity, withholding taxes, documentation, and how the bond would be enforced if problems arise.
For individual investors, access may be limited or indirect. Some exposure may come through funds rather than direct bond purchases.
The Bottom Line
A eurobond is a cross-border bond defined by where it is issued relative to its currency. It can help issuers and investors reach global markets, but the risks depend on currency, credit quality, legal terms, and liquidity.