International bonds – as the name implies, have a different assessment than domestic bonds. The construction of the international financial bonds is the same as the usual bonds. So they can be basic bonds with a variable interest rate, with a zero coupon or dual currency.
International bonds are divided into:
– Foreign bonds,
– Euro bonds.
International bond is the bond of which the issuer has its office registered in a different country than the one in which market’s it’s invested. On this basis it can be closer determined the essence of Foreign Bonds and Euro Bonds:
Foreign bond is an international bond that is denominated in the currency of the country on which market’s it’s invested. Euro Bond is an international bond that is denominated in a currency other than the currency of the country on which market’s it’s invested.
What further distinguishes Eurobonds is that they are invested by the international consortiums. They can be invested in several countries simultaneously.
Another detail deserves an explanation at this point. The name – Eurobond does not mean that it is a bond in some way linked with Europe. This is a fairly vague term, but used for historical reasons. It is important to understand the definition of Euro Bonds that do not indicate any geographic area. Canadian bond denominated in USD, and located in the Japanese market, is an eurobond as well, though Europe has nothing to do with it.
While the foreign bond is subject to financial authorities in the country, the Euro Bonds are to a small extent a subject of control of the financial authorities of the country concerned.
It should be noted that the issuer may be an international organization. The interest rate on foreign bonds may be different than domestic ones. This is due to the risk of the issuer. It is in fact a foreign issuer, not so well known, although it’s not a rule. In fact it’s determined by the reputation of the issuer. International bonds represent an opportunity to raise capital in the international market.