Eurobonds: What are they, who issues and buys them? The best selection of materials on the question: Eurobonds, what is it? What are sovereign Eurobonds

There is a special type of debt obligations called Eurobonds. Borrowers for them are governments, large corporations, international organizations and some other institutions interested in attracting financial resources for a sufficiently long period and at the lowest cost. These instruments first appeared in Europe and were called eurobond, which is why today they are often called “eurobonds”. What kind of bonds are these, how are they issued and what advantages do they provide to each participant in this market? We will try to cover the answers to these questions in detail and clearly in the article.

Concept and main characteristics of Eurobonds

In simple words, we can say that these are bonds issued in a currency different from the national currencies of the lender and borrower, and placed simultaneously on the markets of several countries (with the exception of the issuing country). They are intended, as a rule, to attract funds for a long period - up to 40 years. There are short-term Eurobonds, issued for a year, three to five, and medium-term ones - for a period of ten years.

Eurobond market participants

There are special institutions that place Eurobonds. What are these structures? This is an international syndicate of underwriters, which includes financial institutions different countries. At the same time, their production and turnover are regulated by national legislation in a limited manner. There are also issuers (governments, international and national structures) and investors (financial structures - insurance companies, pension funds, etc.). All members are members of the International Capital Markets Association (ICMA), a self-regulatory organization based in Zurich. Clearstream and Euroclear are used as depository and clearing systems.

There is a special Community Directive, which gives a complete official definition of this instrument and regulates the rules and procedure for offering issues on the market. According to it, Eurobonds are tradable bonds with a number of characteristics:

the need for them to go through the underwriting procedure and their placement through a syndicate, at least two of whose participants belong to different countries;
their supply is carried out in large volumes in the markets of several countries (but not in the country of the issuer);
initially purchased through a lending institution or other approved financial institution.

Properties of Eurobonds

Eurobonds - what kind of securities are they and what are they? characteristic features do they have? Firstly, each Eurobond has a coupon, which gives the investor the right to receive interest on the bonds at a certain time. Secondly, the interest rate can be either fixed or floating (depending on various factors). Thirdly, payment of the stipulated interest may be made in a currency different from the one in which the loan was raised. This is called double denomination. In addition, it is important to know a number of other features of such papers, namely:

These are bearer securities;
are placed simultaneously on several markets;
are issued for a long period - as a rule, 10-30 years (up to 40 inclusive);
the currency in which the loan is raised is foreign for both the issuer and the investor;
Eurobond has a dollar equivalent;
interest on coupons is paid without tax withholding;
Eurobonds are placed by an issuing syndicate, which includes banks, brokerage and investment companies from a number of countries.

Eurobonds are one of the most reliable financial instruments, and therefore their buyers are usually financial institutions such as investment companies, pension funds, and insurance organizations.

History of the emergence and development of the Eurobond market

The issuance of Eurobonds according to the classical placement scheme was first carried out in Italy in 1963. The issuer was the state-owned road construction company Autostrade. 60 thousand bonds with a par value of $250 each were placed. It is precisely because Eurobonds originally appeared in Europe, and to this day the bulk of their trading is carried out there, that the name of the paper has the prefix “euro”. Today this is more a tribute to tradition than a real characteristic of the instrument.

The active development of this market occurred in the 80s. At that time, bearer Eurobonds were especially popular. Later, in the 90s, they began to be “oppressed” by euronotes - medium-term registered bonds issued by developed countries and having (unlike eurobonds) collateral. This was due to the growth of market capitalization and the strengthening of the status of the main borrowers. At that time, their share in the total Eurobond issue reached 60%.

At the end of the 20th century, large ones called “jumbos” appeared on the market. The liquidity of Eurobonds has increased, and the largest borrowers, represented by American government agencies and national entities, have increased interest in this financial instrument. In addition, due to the global crisis and default on loans from the governments of several South American countries, the role of bond loans compared to bank loans has increased. There has been a so-called “flight to quality” process, when investors prefer safe investments over high-yield investments with quite serious risks.

Eurobonds today

Today, Eurobonds are no less in demand. The main goal of issuers entering this market is to search for alternative sources of financial resources (along with traditional internal, in particular, bank loans), as well as diversification of loans. In addition, there are a number of advantages that Eurobonds have. What are these “profits”? Firstly, cost savings in connection with raising capital (can reach 20%). Secondly, there are fewer different kinds of legal formalities and obligations assumed by the issuer. Thirdly, there are practically no restrictions on the directions and forms of using funds, market flexibility, etc.

Issue and circulation of Eurobonds

There are various options for placing Eurobonds, the most common being open subscription. It is carried out through a syndicate of underwriters, and the issues are listed on the stock exchange. After the initial sale, they are "thrown away" by dealers where they can be purchased by telephone and via the Internet from investment companies. Like any investment instrument, Eurobonds have quotes and yields that depend on supply and demand in the market. However, there is another option for issue - limited placement among a certain circle of investors. In this case, the bonds are not traded on the stock exchange (do not have a listing).

Eurobonds of Russia: current situation

Our country first entered the international Eurobond market in 1996. The first issues of debt obligations of this type were carried out during 96-97. Then two subjects of the federation - Moscow and St. Petersburg - received the right to host them, subject to a number of conditions. Today, participants in this market are the country's largest corporations: Gazprom, Lukoil, Norilsk Nickel, Transneft, Russian Post, MTS, Megafon. Eurobonds of Sberbank, VTB and Gazprombank, Alfa Bank, Rosbank and others also play a significant role. It is important to note that for Russian companies, entry into the Eurobond market is limited by national legislation. Thus, joint-stock companies can attract financing using this instrument in an amount not exceeding the amount of their authorized capital. There are also restrictions on the issuance of unsecured Eurobonds (usually collateral is required) and other rules. You can find out the reliability of Russian issuers using data from specialized rating agencies such as Moody's, Standard & Poor's and others.

Russia is annually present on the international borrowing market. Despite the fact that the country has enough of its own sources of financing, according to the Minister of Finance, this is an important event within the framework of Russian budgetary policy. In 2014, one or two exits to the foreign market are planned with Eurobonds in dollars and euros with a total volume of $7 billion (presumably).

Ukrainian Eurobonds: buy and “burn out”

Russia participates in this system not only as an issuer, but also as an investor. Last December, Russia bought Ukrainian Eurobonds for a total amount of $3 billion, becoming the only buyer of this issue. However, such an investment may not be beneficial for the country. in the best possible way. Since February of this year, S&P and Fitch have repeatedly downgraded the ratings of Ukrainian Eurobonds. What does this mean? The bond rating reached the CCC (pre-default) level, their value on the market decreased, and the likelihood of default on them increased. Russia may demand early repayment of the debt, but its position on this issue is weak. Due to negative trends in the Ukrainian economy, it will not be easy for the Russian Federation to prove that it did not suspect the possibility of default, the risks of which were spelled out in the 200-page prospectus. Ukraine's refusal to comply with its obligations has a very unpleasant consequences and for the country itself, associated with the deterioration of the credit history on the international market, holders of its securities abroad and the inability to enter the Eurobond debt market for a long time. Therefore, it is in the interests of both parties that the issue of bonded debt be resolved positively.

Conclusion

Thus, Eurobonds are very reliable, as a rule, long-term investment instruments that make it possible to attract financing on the international capital market. They are placed through specially created syndicates and are regulated by supranational structures. Rating agencies, which determine the reliability of the financial instruments of a particular country, play a great role in the Eurobond market. Today Russia is an active participant in the international Eurobond market, acting as an issuer and investor.

Eurobonds are a reliable financial instrument for any investor. Their reliability is directly related to the reputation of the issuer who is responsible for issuing securities. They are large states and global financial corporations. Eurobonds contribute not only to preserving invested funds, but also to obtaining a fixed income.

Eurobonds - what is it?

Eurobonds (Eurobonds) are usually called securities that are designed to attract cash flow for a long period. The term originated in the middle of the last century in Europe, which is why the characteristic prefix “euro” arose. Any country has the right to issue Eurobonds. Eurobonds are divided into two types: euronotes and eurobonds. The first type can be produced by states with a high degree of development. Bonds can be issued by any other country with different levels of development.

Russian Eurobonds have a number of characteristic features:

Long period of action.
The dollar is the denomination.
Foreign currency is used for borrowing, both for issue and as deposit.

It’s not for nothing that Eurobonds are called debt. The purpose of placement is the opportunity to obtain a long-term loan. It can vary from 10 to 40 years inclusive. Not everyone can use such a loan. The role of the issuer (the one who issues) is the government of various countries around the world. Large global corporations can also issue Eurobonds. Once the securities have been issued, they must be offered for sale. This process cannot be carried out in the issuing country. Initial ownership is carried out at the par value of the securities. Further, the price for them can rise or, conversely, decrease according to market laws. Upon completion of the period with which the securities were issued, the investor can apply for their redemption.

The purpose of issuing debt securities for any government is to raise funds for growth and development of the economic level. The sale of securities is entrusted to investment banking structures and syndicates, both Russian and foreign. These companies go by another financial name - underwriters. For sales purposes, companies list Eurobonds on various financial exchanges, where anyone can buy them. Further, new owners can sell the purchased securities at a value different from their par value. The selling price will depend on the level of supply and demand in the market. Selling and purchasing Eurobonds is similar to ordinary types of securities on the stock exchange.

To buy a bond, an ordinary individual must have huge capital, since the price for one piece is very high. But the acquisition is still realistic for a limited number of private investors. Further, the bond handling procedure depends on the experience and financial knowledge required. Receiving income or incurring losses depends on monitoring quotes, careful analysis of supply and demand, and professional instinct in changing market trends. Anyone will not be able to buy the security they like, since only professional participants use the stock exchange.

The rules for using the exchange provide for the opportunity for any individual to create any company with a legal form of ownership, for example, “LLC” and undergo registration in order to begin transactions for the purchase and sale of valuable assets. But the disadvantage of this stage is the rather large amount of the down payment and the registration and maintenance of strict documentation.

For convenience, anyone can use the services of a professional stock broker. He is an experienced exchange participant and takes a certain percentage for his work.

Eurobonds of Russia

Previously, Russian Eurobonds were placed only in the vastness of the world's European funds. Currently, they operate on other securities exchanges. The meaning of purchasing Eurobonds is a certain total interest paid by the issuer to the owner (investor) of the securities.

Eurobond Russia is a coupon bond that has a fixed or non-standard interest rate. A coupon is the part of a paper bond that is to be torn off after the income portion is paid.

Eurobonds in the Russian Federation, as a rule, are issued in a formless form, that is, in reality there may be no coupons, but the concept is used. Eurobonds are issued with special coupon rates. According to them, the issuer subsequently pays the amount to the investor (owner).

Russian Eurobonds have a nominal value of the dollar, and income is also payable in this currency. Currency exceptions are allowed.

Previously, it was possible to purchase Eurobonds only through foreign world funds. Currently, securities transactions take place on the territory of the Russian Federation, for example, on the Moscow Exchange.

The entry threshold to such an exchange has decreased significantly. Now anyone can buy a bond using brokerage services. The contribution amount is approximately $1000. By paying for it, access to participation in transactions opens. In order to purchase a Eurobond on the Moscow Exchange, the user does not have to be a highly qualified professional. In order to purchase the necessary Eurobond, it is enough to select the desired broker, create a personal account and transfer a certain amount to its balance. There are two options for transferring funds: transfer from a personal bank account or make a transfer from the Moscow Exchange.

To purchase a Eurobond, you must pay for the transaction in the currency in which the security is sold. Next, you need to resolve the issue with the choice of documents and submit a purchase request. Brokerage specialists who have access to the Moscow Exchange can buy and put up for auction. The profit from the purchase of a Eurobond is withdrawn to a personal bank account or to the foreign exchange market. The amount to be withdrawn is converted into rubles.

The reliability of securities is equal to the stability of the issuer that issued them. As a rule, Eurobonds are issued only by companies that have verified all financial requirements. Small corporations do not comply with established rules and therefore cannot issue securities of this level.

Eurobond quotes

Example: an investor decided to purchase a Eurobond of a specific issuer, but for this it is convenient to use the special free program SMARTx. It helps to track the level of quotes. The name of the issuer that the investor requires should be entered into the search bar. The table that appears will include the value of each Eurobond in dollars online. Also, the program parameters allow you to build a quote chart, where, by setting a time range, you can observe price changes from one day to several years.

The program's advanced interface allows you to set up a chart in any currency, not just dollars. Through the program, it is possible to purchase a Eurobond, since it is a trading terminal. You can purchase Eurobonds of Russian issuers both on the Moscow Exchange and outside its zone. Every investor should know that the largest large-capital transactions take place off the exchange. Such transactions can only be made with brokerage participation. Russian Eurobonds actively participate in trading on foreign stock exchanges.

The list of issuers of corporate bonds includes banking structures. The yield level of these Eurobonds is significantly higher than ordinary annual foreign currency deposits. In addition to purchasing Eurobonds, a stable profit comes from resale of a debt security on an exchange or outside its coverage area. To increase the potential yield of a Eurobond, it is advisable to use the services of a professional broker or buy assets from his “shoulder” - this will allow you to achieve an annual profit of up to 15% in best case scenario. Such securities have the lowest level of possible risks. Eurobonds are issued on a continuous basis. During this period, issuers cover old assets. Due to the receipt of new borrowed funds, issuers fully manage to cope with their financial obligations.

Eurobonds - yield

The advantage of deposits in Eurobonds is that the profit received is much higher than from deposits. Income consists of interest payable, as well as the existing difference between the face value price and the resulting market price on the date of full repayment. Banks offer a higher annual rate than regular accounts. The usual annual interest rate is 5-10%, as opposed to deposits with a rate of 2%. Do not forget that the higher the level of potential profitability, the greater the possible risks.

Due to the fact that the promised interest is accrued daily, and not once a year, you can avoid the fear of early withdrawal and account closure. The investor's income will not be lost. A Eurobond, chosen in dollar currency, guarantees the stable preservation of funds, unlike the national one. At any moment, a default may occur, that is, depreciation of the money supply.

The yield of Eurobonds is divided into the following types:

Coupon. It is established at the issue stage by the issuer and is subsequently paid to the investor. The rate is characterized by the level of fixed income for the year. The investor relies on it in the event of an acquisition.
Current. Another name is market. Profitability is achieved in connection with the purchase of a security at market value.
Full. Depends on the market price, which included all possible investment risks during the period of ownership of the security.

To assess the level of profitability of such securities, you should familiarize yourself with the benefits of the acquisition. It is achieved due to the following advantages:

Real profitability indicator. The annual interest rate on Eurobonds is several times higher than that on conventional foreign currency deposits.
Liquidity. Eurobonds can be sold at any time at an adequate price without the risk of losing interest on them. The accumulated coupon yield will be automatically included in the price of the security on a daily basis. This creates an increase in its price. When selling, the seller receives not only the principal value of the asset, but also the unpaid coupon income on it. It is possible to sell only part of the Eurobond. This is an advantageous difference from conventional foreign currency deposits. When withdrawing early, the investor loses a significant amount in interest. Also, when depositing funds into a regular deposit, the amount is “frozen” by the bank.
Stable payment system. The investor makes a profit 1-2 times during the year.
Fixation period. Purchasing Eurobonds with a high coupon interest rate of up to 15 years guarantees the investor a constant profit throughout the entire life of the security.
Protection against changes in the ruble exchange rate. The owner should not be afraid of a possible surge in inflation and devaluation of the national currency. This will help you maintain your savings and even make a profit from it.

Do not forget about the taxation of Eurobonds, the rate is 13% of income. It includes payments on the coupon portion and profit from re-sales. Example: an investor purchased a Eurobond at a price of $2,000 and sold it for $2,300, the resulting profit of $300 is subject to tax and is subject to payment of 13%. The exception will be Eurobonds issued by the Ministry of Finance of the Russian Federation. There is no need to pay tax on them. The investor personally does not need to pay the tax levied. This is what the broker does. He is also an agent of the Tax Authority. The broker independently calculates the tax, then withholds it and transfers it to the state budget. The investor receives his income taking into account the tax charged.

Perpetual Eurobonds

Such Eurobonds are otherwise called eternal. These are a type of securities that do not have a set date for repayment of the debt. An investor who purchased such a security on the market can receive a fixed income for an indefinite period of time or sell it to another buyer. The issuer is a bank, the state, and lays down in advance the conditions for future repayment after a set period of time. The advantages of perpetual papers include the following important points:

The yield portion of the coupon is significantly higher. At any time, an investor can sell a Eurobond to another investor. Upon sale, he will receive the face value of the asset and will not lose the coupon income.
The issue of perpetual securities is a profitable process for the issuer. This has a very beneficial effect on the financial activities of banks. By attracting assets, capital increases. And the expansion of such financial capital contributes to the better functioning of credit services and the receipt of borrowed assets.

Six years ago, a Russian bank was able to issue perpetual debt securities for the first time. During the same period of time, GazProm Bank followed suit. And two years ago another well-known bank was able to place perpetual debt securities. All issued assets are Eurobonds.

What are Eurobonds in simple words

The issuer, represented by the state or government, issues Eurobonds in order to obtain new borrowed assets from investors. The issuer needs financial assets to solve any projects, business development, etc. Investors, who are also depositors, when purchasing the required Eurobond, expect to receive constant income 1-2 times a year.

A Eurobond is identical to a regular debt security and has the same parameters:

Denomination This is the cost of one Eurobond.
Maturity. A specific date is set upon which the bond must be redeemed and the principal amount of the loan must be repaid. That is, the maturity period is the period of life of the Eurobond.
Coupon income. This is a fixed income that must be paid by the issuer to the owner of the asset.
Market price. This is the price of one bond on the market. It can either increase or decrease, depending on the demand in the securities market. At the same time, the coupon income cannot change.
Current type of profitability. Interest income for the year. It depends on the changing market value.

To put it simply in simple language, then the investor lends his money to the issuer for a long period. Instead, each year, the investor receives a profit and, at the end of the maturity period, the total amount of his investment.

Eurobond is coupon bond, which is issued in foreign currency. A specific value is issued for a long time, more than 40 years. There are also medium-term Eurobonds - more than 10 years and short-term Eurobonds - from 1 to 5 years.

History of origin

For domestic companies, entry into the bond market is regulated by national legislation. This way, enterprises can attract investors with financing in an amount not exceeding their authorized capital. You can find out about the reliability of issuers in a particular country on special websites: Standard and Poor’s, Mood’s.

Eurobond market participants

Organizations dealing with these bonds are members of the International Capital Market Association (ICMA). The organization is located in Zurich. Among them are issuers (international and national organizations, as well as governments of different countries) and investors (insurance communities and other financial institutions).

A separate Directive has been issued which gives correct definition and provides rules and procedures for the use of issues on the bond market. It states that Eurobonds are securities that have a number of characteristics:

they must go through the procedure for organizing the issue. Their placement occurs through a syndicate, at least two of whose participants must be citizens of different countries;
their supply occurs in larger quantities on the market of different countries (except for the country of the issuer);
They are initially purchased with the help of a lending institution or other approving financial institution.

Based on what has been written above, we can conclude that Eurobonds are a long-term and completely safe investment instrument that allows you to attract foreign investors. Securities are placed with the help of a specially created syndicate. They are controlled by international structures.

There are rating agencies that determine the reliability of Eurobonds from around the world. The Russian Federation actively participates in the international Eurobond market, with the state acting as both an investor and an issuer.

Stay up to date with all the important events of United Traders - subscribe to our

Having free funds available, many people think about where to invest their finances to increase capital in the future. There are many areas for profitable investment. However, today the most promising assets for investors are bonds and Eurobonds.

A type of long-term securities with which you can attract cash capital for an established and documented period. This type of bond first appeared in Italy in 1963. Initially they were issued only in Europe, but nowadays all economically developed countries of the world are engaged in issuing Eurobonds.

Eurobonds are issued in any recognized world currency, the only requirement is that it differs from the currency used in the country of the issuer and the borrower. Eurobonds are placed simultaneously on the financial markets of several countries, but Eurobonds cannot be placed for trading in the country in which they were issued.

The duration of Eurobonds is primarily aimed at long-term investments that reach a maturity of up to 40 years. On average, the validity period of Eurobonds is 10−15 years. However, there are also short-term Eurobonds with a period of one to five years.

Features of Eurobonds:

This type of securities can only be purchased and sold in dollars and euros. Therefore, before purchasing the presented asset, it is necessary to convert currencies.
Eurobonds are a reliable type of asset for investment. A high degree of reliability is guaranteed, first of all, by the fact that only large organizations are involved in issuing the presented security. Thus, choosing the required asset with higher returns and lower risk is greatly simplified.
The average cost of this type of securities is significantly higher than the average cost of other types of bonds. Thus, lots are produced, the cost of which starts from one hundred thousand dollars. However, there are also lots worth from one thousand dollars.
Low liquidity. Since Eurobonds are extremely good option for investment, the demand for them among large investors is extremely high. Therefore, they are sold almost immediately after issue, with investors keeping these assets with them until the end of the bond's life. However, despite this level of demand, supply remains low.

Russian Eurobonds are also in demand.

Who produces them

The process of issuing Eurobonds is carried out through an international syndicate of underwriters. Issuing a Eurobond is a multi-stage process that only the largest corporations can carry out. Despite the name of this type of bonds, all economically developed countries of the world can issue them.

Eurobond chart - these are the main indicators that are monitored knowledgeable people. They are compiled on certain resources.

Where and how to buy Eurobonds for an individual

For a long time, Eurobonds were not very popular among private investors, since the minimum deposit in Eurobonds was $100 thousand. This amount was extremely significant for most private brokers, so they had to look for other assets to invest.

However, recently the minimum contribution to Eurobonds has dropped to one thousand dollars. It was after this that many became interested in Eurobonds as a promising asset for long-term investment.

Where can you buy Eurobonds?

Eurobonds, like any other assets, can be freely purchased and sold on almost any international exchange, including Eurobonds are also available on the interbank Moscow Currency Exchange.

Process of purchasing Eurobonds:

First, you need to open your own account on one of the exchanges where this type of securities is traded. The most convenient option for Russian-speaking investors is the Moscow Exchange (MICEX).
After opening an account, funds must be credited to it.
Next, you need to convert rubles into dollars, since Eurobonds are traded only in the specified currency. The best way to do this is as follows: deposit money in rubles, transfer it to the foreign exchange market, purchase dollars on the market at the current rate and transfer the received currency back to the account. This way, you can avoid unnecessary commissions that banks charge when converting currencies.
Now that you have dollars in your account, you can begin to select and purchase Eurobonds.

How to make money on bonds - choosing a broker, quotes, charts

Bond trading is a good source of income. However, we should not forget that this method of earning money has a certain risk of losing the investor’s capital. Therefore, only people with the necessary knowledge and extensive experience should engage in trading on the stock exchange. If you do not have the knowledge and experience, but still want to invest your money, then use the help of a broker.

When choosing a broker, consider the following parameters:

Reliability. To determine the reliability of a broker, check whether it has a license, how long it has been working on the exchange, and also read reviews about it on the Internet. In addition, there are various broker ratings where you can determine more reliable options for cooperation.
Trade category. You need to choose a broker from the category in which you are going to trade. In this case, you can achieve maximum results.
Communication with the client. Some brokers are ready to provide an individual approach to each of their clients. Working with such brokers is more comfortable and profitable, especially for beginners.
Commission. When choosing a broker, it is extremely important to consider the size of his commission.

How to choose the right asset to trade?

When choosing a Eurobond for trading, you need to take into account three main parameters: profitability, risk and trading period. Selecting Eurobonds is much easier than any other securities, since they all have a high degree of reliability. In this case, all that remains is to choose the validity period of the asset and determine the bond with the maximum yield.

Video “Eurobonds: conservative investments or risky ones”

In an unstable economy, many citizens, even those who have minimal savings, are interested in ways to invest safely. Today we’ll talk about Eurobonds - one of the options for profitable investment of funds, both long-term and short-term.

However, questions arise: Why this type bonds bear the prefix “euro”? Are Eurobonds really accessible to the average Russian? What are “Eurobonds” and is it worth investing in these securities at all?

Our reader will find answers to all these and many other questions in this article.

The terms “Eurobonds” and “Eurobonds” are often used as independent definitions, without any context (as a rule, these two concepts do not connect each other in one information source). Therefore, many still have a question, what are the differences between these concepts? Or is it still the same thing?

The term "Eurobond" has more classic character, and “Eurobond” is a type of Eurobond, only this term is used in narrower circles. It turns out that “Eurobond” is simply the name of one of the types of Eurobonds in financial language (slang).

What are Eurobonds?

From the previous paragraph, we have already found out that Eurobonds are a type of Eurobond (in everyday language, in fact, these are the same thing), and Eurobonds are a type of bonds. Here's the chain. Reducing it logically, we get that Eurobonds are one of the types of bonds.

Eurobonds appeared back in 1963. More specifically, Eurobonds first appeared in Italy. By the way, it was precisely because of their origin that they received the prefix “euro” (since they “originated” in Europe), which in modern times has already lost its original semantic principle. Indeed, currently Eurobonds are issued and operate not only exclusively in Europe, but throughout the world.

A Eurobond is a debt security issued by a company or government for the purpose of raising borrowed funds on the external capital market. The face value of a Eurobond is expressed in a currency that is foreign to the borrower.

In other words, these are bonds that are issued in any currency in the world, but different from the national currencies of the issuer and the borrower, and are also placed on the financial markets of a number of countries (except for the country that issued the securities).

Classification types of Eurobonds

There are 2 main types of Eurobonds:

Eurobonds
Euronotes

The distinctive features and features of these types of Eurobonds are discussed in the table:

Comparative characteristics of Eurobonds and Euronotes

In addition to dividing into types, Eurobonds also have other classification features. For example, they are divided into subtypes depending on the method of payment of income or the method of repayment.

Eurobonds, like any type of bonds, can be short-term(from 1 to 5 years) and long-term(up to 40 years old!). The average duration of such investments is 10 years.

Advantages of Eurobonds

What are the benefits of Eurobonds for an investor? What advantages do Eurobonds have?

Firstly, Eurobonds provide their owner with regular interest income. This coupon income is at the level 7-11% per annum. However, it is compensated by the fact that in conditions of a liquidity crisis, Eurobonds can be purchased at a discount of 15-30%. In addition, Eurobonds are a foreign exchange asset. And transferring funds into foreign currency is a generally accepted measure to protect capital from inflation and economic shocks.

In conditions when the ruble is constantly becoming cheaper, investments in Eurobonds become especially profitable.

One of the advantageous features of Eurobonds is protection against ruble devaluation. After all, Eurobonds are traded on international markets and are denominated in foreign currency (usually dollars or euros).

An excursion into history: the high inflation of 2015-2016, which crippled many investors, did not affect Eurobond holders: they not only did not receive any losses, but were even able to make a good profit (in terms of rubles).

By investing in Eurobonds, you diversify your portfolio. You can buy bonds different types borrowers and different periods repayment. For example, securities of the largest Russian corporations or Government securities of the Russian Federation.

For reference! Diversification of a securities portfolio is the optimal investment of funds in different kinds valuable papers. With proper portfolio diversification, you can minimize your risks and possible losses.

The yield on Eurobonds is easily predictable: such indicators as:

amount of debt
amount of payments
urgency

known in advance.

By the way, Eurobonds can be sold at a fair price at any time. And most importantly, without losing interest.

What is important is that the turnover of Eurobonds is regulated by international law. The functions of the regulator of this market are performed by the international association ICMA.

Accordingly, Eurobonds are a very transparent investment instrument. The issuers of these securities are large companies reporting according to international standards.

About the procedure for purchasing and selling Eurobonds

Eurobonds are a reliable financial instrument also because they are placed by an international syndicate of underwriters.

By the way, a syndicate of underwriters is a group of investment banks that work towards the sale of new issues to various investors.

Such an international syndicate unites the largest financial institutions from different countries.

A distinctive feature of this system is that each country has limited capabilities to regulate the issue and turnover of Eurobonds. This is monitored by national legislation.

All market participants:

Underwriters;
Issuers (governments, international companies);
Investors (insurance companies, pension funds and other structures)

Who can buy Eurobonds?

Eurobond is an instrument suitable for larger investors. As a rule, buyers of Eurobonds are the following large entities:

Insurance funds;
Investment funds;
Large private market players;
Investment companies;
Large corporations.

For a private individual, there is a fairly high entry threshold. This is explained by the fact that the denomination of Eurobonds is quite large. The minimum purchase volume (lot) is a very large amount ($100,000). Plus, don’t forget about commission costs.

Russian “relationships” with Eurobonds

Russia began active participation in the Eurobond market back in 1996. Today, the largest Russian credit institutions and companies are involved in this process, including Sberbank, Gazprom, VTB, Lukoil and MTS.

In the international bond market, Russia acts both as an investor and as a borrower. For the budgetary policy of the Russian Federation, this activity is a very important factor.

Interesting restrictions: Joint stock companies cannot raise more funds using Eurobonds than their authorized capital.

Russian companies mainly use 2 methods of placing Eurobonds on foreign markets:

Direct access of Russian companies to international capital markets. That is, the Russian company itself acts as both a borrower and an issuer.
A specially created company is involved as an issuer, which issues Eurobonds on its own behalf, but under guarantees (guarantees) from a Russian company.

Is it possible to make money on Eurobonds in 2019?

Bonds are a fixed income investment instrument. However, this profitability is different times also has different sizes.

For example, in 2012, there was a certain imbalance in the bond market in relation to the cost and reliability of Eurobonds. European investors dumped bonds of all Russian issuers, including those with maximum reliability. As a result, federal bonds could be purchased at a large discount, which gave very good figures at maturity. Even better than foreign currency deposits, or any alternative investment options with the same return.