International Bond

What Is an International Bond?

An international bond is a debt obligation that is issued in a country by a non-domestic entity. Generally, it is named in the currency of its issuer's native country. Like different bonds, it pays interest at specific spans and pays its principal amount back to bondholder at maturity.

International bonds are generally corporate bonds. Numerous mutual funds in the United States hold these bonds.

Figuring out an International Bond

As the business world turns out to be more globalized, companies currently have ways of accessing less expensive sources of funds and financing outside of their country of operations. Rather than depending on investors in their own domestic markets, businesses and legislatures can tap into the pockets of global investors for much-required capital. One way through which companies can access the international lending scene is by giving international bonds.

An international bond is issued in a country and currency that isn't domestic to the investor. According to the point of view of a domestic investor and resident of the United States, an international bond is one that is issued by corporations or legislatures in different countries named in a currency other than the U.S. dollar. These bonds are issued outside of the United States and are generally backed by the currency of the native country.

Types of International Bonds

A few assortments of international bonds exist.

Eurobonds

Eurobonds are debt issued and traded in countries other than the

country in which the bond's currency or value is designated in. These

bonds are many times issued in a currency that isn't the domestic currency of the

issuer.

As the name suggests, these bonds generally are issued by companies on the European mainland, or in the European Union, however they can trade in non-European countries, too. For instance, a French company that issues bonds in Japan named in U.S.

dollars has issued an Eurobond, all the more specifically, a Eurodollar bond. Different types of Eurobonds are the Euroyen and Euroswiss bonds.

Global Bonds

Global bonds are like Eurobonds, however they can likewise be traded and

issued in the country whose currency is utilized to value the bond. Drawing

from our Eurobond model over, an illustration of a global bond

will be one in which the French company issues bonds designated in the

U.S. dollar and offers the bonds in both Japan and America.

Brady Bonds

Brady bond s are sovereign debt securities, issued by agricultural nations however named in U.S. dollars and backed by U.S. Treasury bonds. Part of a global program developed in 1989, Brady bonds are a means to assist countries with emerging or beset economies better deal with their international debt.

International Bonds versus Foreign Bonds

Despite the fact that they sound comparative, and are at times utilized conversely, international bonds and foreign bonds are not something very similar. Foreign bonds are issued in a domestic market by a foreign issuer — yet in the currency of the domestic country. For instance, a bond that is issued in Canada and valued in Canadian dollars by a U.S. company is a type of foreign bond.

Frequently, foreign bonds bear adorable names, mirroring the nearby currency or country they're issued in. The bond in our model above would be alluded to as a Maple bond. Different types of foreign bonds include:

Samurai bond (issued in Japanese yen)
Yankee bond (issued in U.S. dollars)
Matilda bond (issued in Australian dollars)
Bulldog bond, (issued in British pounds sterling)

Special Considerations

International bonds are a great method for enhancing one's portfolio as

investors can gain exposure to foreign securities that may not

essentially move in tandem with securities trading on nearby markets. In any case, since international bonds are commonly named and pay interest in a foreign currency, the value of the bond will vary contingent upon the economic conditions and exchange rates between the domestic host country and the foreign country that houses the issuer. These bonds are, consequently, subject to currency risk. Investors ought to take alert while investing international bonds since they might be subject to various regulatory and taxation requirements than the ones with which the investor is recognizable.

Features

International bonds are normally corporate bonds.
International bonds can offer portfolio diversification, yet are exceptionally subject to currency risk.
An international bond is a debt obligation that is issued in a country by a non-domestic entity in its native currency.