《国际财务管理》（英文版） Chap 7 International Bond market

Chapter Seven International Bond market Chapter objective This chapter continues discussion of international capital markets with a discussion of the structure of the international bond market

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. INTERNATIONAL FINANCIAL MANAGEMENT EUN / RESNICK Second Edition 7 Chapter Seven International Bond Market Chapter Objective: This chapter continues discussion of international capital markets with a discussion of the structure of the international bond market

Chapter Outline . The World's bond markets .A Statistical Perspective o Foreign Bonds and eurobonds °1 ypes of Instruments o Currency Distribution, Nationality, Type of Issuer International Bond market Credit Ratings e Eurobond market structure practices International Bond market indices Irwin/McGraw-Hill7-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Outline ⚫ The World’s Bond Markets: A Statistical Perspective ⚫ Foreign Bonds and Eurobonds ⚫ Types of Instruments ⚫ Currency Distribution, Nationality, Type of Issuer ⚫ International Bond Market Credit Ratings ⚫ Eurobond Market Structure & Practices ⚫ International Bond Market Indices

The World's Bond markets ● a statistical pe erspective The total market value of the worlds bond markets are about 50% larger than the worlds equity markets Most issues are denominated in u.s. dollars Japanese Yen are second, followed by Deutchmarks in a distant third Irwin/McGraw-Hill7-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. The World’s Bond Markets ⚫ A statistical perspective: ⚫ The total market value of the world’s bond markets are about 50% larger than the world’s equity markets. ⚫ Most issues are denominated in U.S. dollars, Japanese Yen are second, followed by Deutchmarks in a distant third

A Statistical Perspective Domestic international Total 47.89 45.1 47.5 F 18.0 11.7%0 17.2 DM7.09 10.3%0 7.4 Irwin/McGraw-Hill (# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. A Statistical Perspective: Domestic International Total $ 47.8% 45.1% 47.5% ¥ 18.0% 11.7% 17.2% DM 7.0% 10.3% 7.4%

Foreign Bonds and eurobonds o Bearer Bonds and registered bonds o National Security Registrations o Withholding Taxes o Recent regulatory Changes ● Global bonds Irwin/McGraw-Hill7-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Foreign Bonds and Eurobonds ⚫ Bearer Bonds and Registered Bonds ⚫ National Security Registrations ⚫ Withholding Taxes ⚫ Recent Regulatory Changes ⚫ Global Bonds

Bearer bonds and Registered bonds o Bearer Bonds are bonds with no registered owner As such they offer anonymity but they also offer the same risk of loss as currency Registered Bonds: the owners name is registered with the issuer e U.S. security laws require Yankee bonds sold to U.S. citizens to be registered Irwin/McGraw-Hill (# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Bearer Bonds and Registered Bonds ⚫ Bearer Bonds are bonds with no registered owner. As such they offer anonymity but they also offer the same risk of loss as currency. ⚫ Registered Bonds: the owners name is registered with the issuer. ⚫ U.S. security laws require Yankee bonds sold to U.S. citizens to be registered

National Security registrations o Yankee bonds must meet the requirements of the SEC, just like U.s. domestic bonds Many borrowers find this level of regulation burdensome and prefer to raise u.s. dollars in the Eurobond market o Eurobonds sold in the primary market in the United states may not be sold to U.S. citizens o Of course au.s. citizen could buy a eurobond on the secondary market Irwin/McGraw-Hill7-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. National Security Registrations ⚫ Yankee bonds must meet the requirements of the SEC, just like U.S. domestic bonds. ⚫ Many borrowers find this level of regulation burdensome and prefer to raise U.S. dollars in the Eurobond market. ⚫ Eurobonds sold in the primary market in the United States may not be sold to U.S. citizens. ⚫ Of course, a U.S. citizen could buy a Eurobond on the secondary market

Withholding Taxes o Prior to 1984. the United States required a 30 percent withholding tax on interest paid to nonresidents who held U.S. government or U.S corporate bonds The repeal of this tax led to a substantial shift in the relative yields on U.S. government and El uroaolar bonds This lends credence to the notion that market participants react to tax code changes Irwin/McGraw-Hill7-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Withholding Taxes ⚫ Prior to 1984, the United States required a 30 percent withholding tax on interest paid to nonresidents who held U.S. government or U.S. corporate bonds. ⚫ The repeal of this tax led to a substantial shift in the relative yields on U.S. government and Eurodollar bonds. ⚫ This lends credence to the notion that market participants react to tax code changes

Recent regulatory Changes Shelf registration(SEC Rule 415) Allows the issuer to preregister a securities issue, and then offer the securities when the financing is actually neede d. ● SEC Rule144A Allows qualified institutional investors to trade private placements These issues do not have to meet the strict information disclosure requirements of publicly traded issues Irwin/McGraw-Hill7-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Recent Regulatory Changes ⚫ Shelf Registration (SEC Rule 415) ◼ Allows the issuer to preregister a securities issue, and then offer the securities when the financing is actually needed. ⚫ SEC Rule 144A ◼ Allows qualified institutional investors to trade private placements. ◼ These issues do not have to meet the strict information disclosure requirements of publicly traded issues

Global bonds o a global bond is a very large international bond offering by a single borrower that is simultaneously sold in North America, Europe and Asia o Mostly institutional investors are the purchasers so SEC Rule 415 and 144a have likely facilitated global bond offerings, and more can be expected in the future Irwin/McGraw-Hill7-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights

Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Global Bonds ⚫ A global bond is a very large international bond offering by a single borrower that is simultaneously sold in North America, Europe and Asia. ⚫ Mostly institutional investors are the purchasers so far. ⚫ SEC Rule 415 and 144A have likely facilitated global bond offerings, and more can be expected in the future