International bonds International bonds are bonds issued by a government, financial institution, business enterprise or national organization to raise and finance funds in foreign financial markets and are denominated in foreign currency. An important feature of international bonds is that the issuer and the investor belong to different countries and the funds raised come from foreign financial markets.
International bonds can be issued and traded to balance the balance of payments of the issuing country, or to bring in funds for development and production by the issuing government or enterprise. Depending on the currency used and the place of issuance, international bonds can be divided into foreign bonds and Eurobonds. International bonds are cross-border bonds, involving two or more countries, and have certain special characteristics compared to domestic bonds.
Wide source of funds
International bonds are raised on the international securities market and are issued to investors in many countries, so their sources of funding are much more extensive than domestic bonds, and by issuing international bonds, the issuer can flexibly and fully fund its construction projects and other needs.
Large issue size
International bonds are generally issued on a larger scale because one of the purposes of raising such debt is to take advantage of the breadth and sufficiency of funding sources in international securities markets. At the same time, as the issuer's access to the international bond market must be assessed by an international credit rating agency, only highly creditworthy issuers can successfully raise funds, so large borrowings are possible only when the issuer's creditworthiness is fully confirmed.
There are risks
When issuing domestic bonds, the funds raised and repaid are in the domestic currency, so there is no exchange rate risk. When international bonds are issued, the funds raised are in foreign currencies, and in the event of exchange rate fluctuations, both the issuer and the investor may suffer unexpected losses or unexpected gains, so an important part of the risk of international bonds is exchange rate risk.
National sovereignty protection
Raising funds in the international bond market can sometimes be guaranteed by a promise of eventual payment from the government of a sovereign country. If such a promise is guaranteed, the various international bond markets are willing to open up to that sovereign country, which also makes the international bond market a high level of security. Of course, the government representing the sovereign also has to check and control its own issuers borrowing in the international bond market.
Currency of measurement
International bonds are issued on the international market, so their denomination currency is often an international common currency, with the US dollar, British pound, Deutsche Mark, Japanese yen and Swiss franc dominating one stream, so that the funds raised by the issuer are a free foreign exchange fund that can be used universally.
