Eurobond Wiki - What is the eurobond?
A eurobond is an international bond that is denominated in a currency not native to the country where it is issued. Also called external bond; "external bonds which, strictly, are neither eurobonds nor foreign bonds would also include: foreign currency denominated domestic bonds…" It can be categorised according to the currency in which it is issued. London is one of the centers of the eurobond market, with Luxembourg being the primary listing center for these instruments. Eurobonds may be traded throughout the world—for example in Singapore or Tokyo. Eurobonds are named after the currency they are denominated in. For example, Euroyen and Eurodollar bonds are denominated in Japanese yen and American dollars respectively. Eurobonds were originally in bearer bond form, payable to the bearer and were also free of withholding tax. The bank paid the holder of the coupon the interest payment due. Usually, no official records were kept. The word eurobond was originally created by Julius Strauss.The first eurobonds were issued in 1963 by Italian motorway network Autostrade, who issued 60,000 bearer bonds at a value of US$250 each for a fifteen-year loan of US$15m, paying an annual coupon of 5.5%. The issue was arranged by London bankers S. G. Warburg. and listed on the Luxembourg Stock Exchange. Allen & Overy, one of London's Magic Circle of law firms, were the lawyers on the transaction. Their conception was largely a reaction against the imposition of the Interest Equalization Tax in the United States. The goal of the tax was to reduce the US balance-of-payment deficit by reducing American demand for foreign securities. Americans could bypass the costly tax and Europeans could keep open access to US capital. The majority of Eurobonds are now owned in "electronic" rather than physical form. The bonds are held and traded within one of the clearing systems (Euroclear and Clearstream being the most common). Coupons are paid electronically via the clearing systems to the holder of the eurobond (or their nominee account). .
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Definitions of "eurobond"
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The exact origin of the term eurobond is debated, but it is thought to come from a post-war deal that involved the Russians issuing dollar-denominated bonds in Europe, rather than America.. [MoneyWeek RSS - All]
Under the so-called eurobond idea, members of the currency bloc would sell joint bonds to investors, guaranteeing them collectively.. [How the Eurobond Would Work]
He said his country would need to issue bonds on international capital markets, sometimes referred to as a eurobond issue, once this year "to deal with the current budget deficit and refinancing needs.". [Latvia Sees Borrowing Not Topping $1 Billion]
"It's not that the eurobond is the cure-all for their issues, but the market is telling you it was hoping there would have been more of an urgency to attack the crisis.". [BusinessWeek.com -- Top News]
"This is only over once they make the leap to fiscal union or someone leaves and the eurobond is a very strong step towards full fiscal union.". [chron.com Chronicle]
No major demonstrations are planned but the union leaders will head to the summit site to deliver a symbolic "eurobond" - pressing for a joint pooling of debt in the eurozone, a measure that has been steadfastly opposed by Germany.. [Yahoo! News: Business - Opinion]
In July, the government raised € 850 million ($1.07 billion) through a seven-year eurobond sale, offering investors a yield of 4.291%.. [Mexico Sells $1 Billion Century Bond]
So after all the half-measures, partial solutions and months of "kicking the can down the road", the eurobond route, and all that goes with it, may be the only way left to save the euro.. [Eurozone crisis: European Union prepares for the 'great leap forward']
But if the euro is to survive with all 17 members, and as a rival to the dollar, ministers will have to think up more such policies, such as issuing a common eurobond.. [The euro: A project in peril | Editorial]
The eurobond may be what you get if you take the founding principles of the eurozone to their logical conclusion; but it involves a wholesale surrender of economic sovereignty.. [The financial burden of the debt crisis could lead countries to opt out of the euro]
Yet press reports last week suggested that even Germany and France have different visions of how the euro should evolve, with Sarkozy favouring something more akin to Trichet's fiscal union, and German politicians extremely sceptical about the notion of a eurobond.. [The financial burden of the debt crisis could lead countries to opt out of the euro]
The state has taken out a staggering $750 million loan in the form the eurobond in 2008.. [Oxfam: Ghana's New Oil Law Leaves Room for Financial Mistakes]
Mr. Weber: To simply issue joint and several liabilities in the form of a eurobond, in my view, would be plain wrong.. [Ex-German Central Banker: 'Limited Options' on Greece]
Only the joint and several guarantee of a eurobond, or the power of a greatly expanded EFSF, is likely to win over the SWFs.. [Without ECB, Italy May Party Like It's 1992]
Baltic neighbor Lithuania priced a $1.5 billion, 10-year bond at 6.75% Jan. 26—a level Dombrovskis said he was hoping his country could stay below should it go ahead with a eurobond issue this year.. [Latvia Sees Borrowing Not Topping $1 Billion]
Yet if Germany is going to wind up backstopping much of the bad peripheral debt that winds up with the ECB in any case, its resistance to eurobond issuance is irrational.. [Who Would Bail Out the European Central Bank?]
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