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Euro Bonds

Euro Bonds. Dipak Abhyankar. Euro Bond and Euro Credit. We are discussing about foreign currency denominated instruments “Euro Instruments” EuroBond Euro Credits i.e. Euro Loans. EuroBond and Euro Credit. EuroBond. Euro Credit. Borrowed from Banks. Banks are lenders.

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Euro Bonds

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  1. Euro Bonds Dipak Abhyankar

  2. Euro Bond and Euro Credit • We are discussing about foreign currency denominated instruments • “Euro Instruments” • EuroBond • Euro Credits i.e. Euro Loans

  3. EuroBond and Euro Credit EuroBond Euro Credit Borrowed from Banks. Banks are lenders • Generally issued to public. Individuals and corporate/ institutions are lenders • Floating rate of Interest • Fixed / Floating rate of Interest • Listed and traded on exchanges; price varies • Not listed; Not Traded • Issue process is long and time consuming • Relatively less time consuming process of borrowing • Long maturities • Medium term maturities

  4. Corporate Bond • Debt (Loan) instrument issued by corporate to Public • Public (Individuals and institutional investors) become lenders and the issuer is the borrower • Interest is paid as declared at the time of issue

  5. Context of Euro Bond

  6. Context of Euro Bond

  7. Coupon Rate • Coupon Rate is the Interest Rate paid onface value • It is payable periodically (normally p.a.) • “Coupon” word is because of historical practice of detachable coupons to bond; for interest receipt • (See picture)

  8. LIBOR • London InterBankOffered Rate • The interest rate at which prime banks offer dollar deposits to other prime banks in London • Used as benchmark rate • for eg. LIBOR + 1% etc

  9. Types of Bond • Straight Bond • Zero Coupon Bond ZCB • Deep Discount Bond DDB • Bond with Option • Callable Bond • Putable Bond • Bond with Warrant

  10. Straight Bond • Coupon Rate Interest is paid periodically • (usually 1 year)

  11. Zero Coupon Bond • Coupon Rate Interest is calculated on compounding basis • (usually 1 year) • No interest is paid periodically • Maturity Value is paid at the end • Issued at face value

  12. Deep Discount Bond • (is very similar to Zero Coupon Bond) • Coupon Rate Interest is calculated on compounding basis (usually 1 year) • No interest is paid periodically • Maturity Value (Face Value) is paid at the end • Issued at Discounted value

  13. Bond with Option • This can be Straight Bond/ ZCB/ DDB • Option to Issuer to redeem early (Call Option) • Callable Bond • Option to investor to redeem early (Put Option) • Putable Bond

  14. Bond with Warrant • Warrant giving Right to buy equity shares onpriority basis • Extra “Carrot” to make bonds attractive

  15. Junk Bond • High Interest Rate

  16. Petrodollars Dipak Abhyankar

  17. Petrodollars • Deposits by countries that receive dollar revenues from the sale of petroleum to other countries; • the term commonly refers to OPEC deposits of dollars in the Eurocurrency market.

  18. The funds that are controlled by oil-exporting countries and have been used to pay for oil imports. Petrodollars are a huge pool of funds available for investment and the purchase of goods and services. Although stated in terms of dollars, the term generally refers to all currencies.

  19. OPEC • Organization of Petroleum exporting countries

  20. PetroDollar Recycling

  21. Thank you!

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