What is Eurobond?
A Eurobond is a debt securities issued by a country or organization in the currency of another country. Eurobonds are usually sold in international markets and provide investors with returns in different currencies. Eurobonds are priced according to the credit rating, interest rate, maturity period and market conditions of the issuing country or institution.
What are the advantages of Eurobonds?
The most important advantage of Euro Bonds is that it increases the foreign exchange reserves of the issuing country or institution and reduces the exchange rate risk. In addition, Euro Bonds can increase the international recognition and credibility of the country or organization by attracting foreign investors. Euro Bonds can also lower the borrowing costs of the issuing country or organization because they often offer lower interest rates than local markets.
What are the disadvantages of Euro Bonds?
The most important disadvantage of Euro Bonds is that the issuing country or organization is exposed to exchange rate fluctuations. If the issued currency depreciates, the repayment cost may increase. Also, Euro Bonds are generally less liquid than local markets, meaning it can be more difficult to find buyers and sell them. Euro Bonds are also subject to international regulations and taxes, which can create additional costs and difficulties.
What are examples of Euro Bonds?
The Euro Bond market is quite large and diverse. For example, the Treasury of the Republic of Turkey issued a 10-year Euro Bond amounting to 2 billion Euros in 2021. This Euro Bond was sold at an interest rate of 4.25%. As another example, the Apple company issued Euro Bonds with an 8-year maturity of 2 billion Euros in 2019. This Euro Bond was sold at an interest rate of 0.12%.
In conclusion, Euro Bond is a type of bond used as a debt instrument in international markets. Euro Bonds have advantages and disadvantages. The Euro Bond market is preferred by many countries and organizations.