What are Eurobonds? Definition

Eurobonds are bonds issued in a currency that is non-native to the country where the bond is issued. 

For example, bonds issued in the United States in Japanese Yen are called Euroyen bonds. Conversely, U.S. dollar bonds issues in Japan are called Eurodollar bonds.

Why Do Eurobonds Exist?

Eurobonds allow companies to package bonds and sell them in different countries in accord with the host country’s financial regulations, thereby giving companies more versatility in selling their bonds. 

What are Eurobonds?

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Investors often find Eurobonds attractive for their small par value and high liquidity. 

Eurobonds typically pay interest on a yearly basis, as opposed to U.S. corporate bonds which pay twice a year. The more a bond pays interest, the more valuable that bond is to investors. Paying interest once a year decreases the overall value of Eurobonds.

As such, Eurobonds normally pay out a higher yield to compensate for this.

Trading Eurobonds

The Luxembourg Stock Exchange is considered the main trading center for Eurobonds, with the London Stock Exchange being another main center. 

Eurobonds were first traded in 1963, and have been primarily “bearer bonds” until recently. This means that the bond is issued and returned in the form of a physical certificate. 

Today, most Eurobonds are traded electronically through clearing platforms like Euroclear and Clearstream.

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