Eurobonds are considered securities issued in a foreign currency and can be sold both on foreign exchanges and on the markets of the issuing country

Eurobonds are considered securities issued in a foreign currency and can be sold both on foreign exchanges and on the markets of the issuing country. The main difference in this lies in the currency of the issue, which is not limited only to the euro. The first Eurobonds were issued in 1963 by the Italian Autostrade road network in US dollars to circumvent the interest equalization tax imposed in the US. Thus, Europeans retained access to American capital, and Americans could invest in European securities in dollars without paying taxes. But in fact, Eurobonds can be issued in dollars, pounds sterling and any other currency. Companies become issuers of Eurobonds if they want to receive investments in foreign currency. These securities have the basic characteristics of all bonds. These are debt securities with or without a predetermined maturity, with a nominal value of at least $1 thousand. The issuer, that is, the company that issued the securities, pays coupons in the currency of Eurobonds within a pre-agreed time frame. Thus, by investing in Eurobonds, you can win not only on the growth of the bond price and coupon yield, but also on the difference in the exchange rate.

Eurobonds are issued through an international syndicate of underwriters, and companies or organizations with an international credit rating are allowed to issue them. Today, the list of major leading companies in the Eurobond market includes Warburg Dillon Read, Morgan Stanley DW, Deutsche Bank AG, Merill Lynch, J. P. We can include the works of Morgan, Paribas, ABN Amro, Barclays Capital, Suisse First Boston and Solomon Brothers. Each of these companies has about $22,619 million in global markets. $41652 million.Eurobonds are placed in dollar equivalent, with a total market share of 56%.

Since Eurobonds are securities in international circulation, no state can fully control them, so the International Securities Markets Association (ISMA) was established, which constantly monitors the Eurobond market. In the early 1990s, Isma had 866 members, 166 of whom were from the UK, 138 from Switzerland, 57 from Germany and 60 from Luxembourg. ISMA is headquartered in Switzerland, but most of the work is done in London, where the secretariat is located. Eurobonds are traded on London, Hong Kong, Singapore and other major world exchanges.

The main characteristics of Eurobonds are the foreign currency of the issue, the fact that the issuers are states or large companies, they can be long-term (up to 40 years), the owner can independently pay taxes on them, be placed on exchanges of different countries, issued by syndicates of underwriters. In this case, underwriters are credit managers who guarantee payments on obligations even in the event of losses or bankruptcy, and banks and insurance companies are often underwriters. To issue new securities, a syndicate of underwriters is created from several such managers.
There are various types of securities in the form of Eurobonds. The main differences are noted in the income payment options, payment methods and conditions. There are 4 types of yield options. The first is fixed-rate Eurobonds. Interest on them is set in advance and paid once or twice a year. It is produced mainly for a long time. The latter are bonds with a floating interest rate, the yield of which will depend on the financial instrument. The third is zero-coupon securities. Payment for them is not made. Fourth, Eurobonds with investment income -the repayment price is guaranteed to be higher than the nominal value and the placement price. As for the term of the loan, it can be short-term (less than one year), medium-term (from 1 to 10 years), long-term (from 10 to 40 years).
It will be possible to earn income by reselling Eurobonds purchased on Eurobonds at a higher price, earning interest on loans (coupons) or investing in a currency that will grow in the future relative to the currency of your country. As with other securities, the yield of Eurobonds increases with the risk. Issuers can offer interest on coupons depending on their credit rating. The higher this rating of the company, that is, the more reliable it is, the smaller the coupon for the bond. However, given the growth of the currency, you can invest in a reliable issuer and eventually make a good profit in the long run. Companies with a low credit rating offer higher interest on coupons. The shorter the term, the lower the coupon interest. Conversely, long-term bonds guarantee you a higher percentage of income. As standard, the interest rate on Eurobonds ranges up to 5%, which in any case is higher than the interest rates on foreign currency deposits in banks. So it is more profitable to invest in Eurobonds. Another advantage over deposits is the liquidity of Eurobonds, which means that you can sell them at any time.
The debt on the global bond market is more than $100 trillion. Many Eurobonds are not registered, and the form of trading does not allow you to get exact figures for the sector, but they can be about 30 percent of the total amount. Emerging market countries account for a growing share of Eurobond issuance, and governments and companies are looking for deeper and more developed markets for borrowing. In table 1 we see the number of Eurobonds placed by countries on the world market.

In September 2022, the volume of the Eurobond market will amount to $ 127.289 billion, taking into account the decline in securities prices. On the other hand, the volume of Eurobonds placed since 2014 has been steadily declining. This was largely caused by the sanctions imposed on Russia after the annexation of Crimea. Due to potential risks, the demand from foreign investors decreased, which made it difficult for companies to enter the foreign market. A similar situation is observed in the structure of holders of Eurobonds. The share of non-residents began to decline in 2012 due to increased risks and amounted to 30 percent in 2017. After the stabilization of geopolitical risks, the share increased to 60%. Meanwhile, according to the Central Bank, the share of non-residents is 49.6%. However, the calculation includes the freezing of non-residents' assets and their inability to exit Eurobonds, which means that this share may be much lower.

Eurobonds have always had the status of a conservative instrument in investors' portfolios, being a means of hedging the risks of securities and protecting against the depreciation of the national currency. Like any conservative instrument, reliable Eurobonds have a low yield, which is slightly higher than a deposit in a foreign currency in a bank. Eurobonds are traded on London, Hong Kong, Singapore and other major world exchanges.
International lending through the placement of Eurobonds depends on several factors, such as reliability (companies issuing Eurobonds are major international players, many of which are reliable and able to fulfill their obligations), the fund (the Eurobond market does not fall under the jurisdiction of the local legislation of the issuer or investor, which allows you to save on taxes), anonymity (many Eurobonds are issued to the supplier, this allows them to be distributed among investors in incognito mode) and so on.
Buyers of Eurobonds are companies that invest their own or trusted assets in bonds of the European market and thereby receive income. Most often, such investors are various insurance organizations, deposit-taking and non-banking organizations that use financial assets for personal interests. On the other hand, brokers are market entities that buy Eurobonds placed for the purpose of generating income, attracting investments at a lower price, as well as at the expense of Euro deposits and other resources.
There are two types of risks in the bond market associated with higher rates and defaults of borrowers. The increase in the current rate is due to the growth of the US economy, which accelerates inflation. As the economy grows, the number of defaults is usually small. The most important thing to do is to control interest rate risks. Investors will need to maintain a low maturity of the portfolio and be very active.
The yield on 10-year US Treasury bonds peaked at 2.95 percent, which, among other things, led to a decline in prices for high-yield bonds by an average of 2-3 percent since the beginning of the year. Considering that it gives an average coupon of 5.5-6.5%, this is a lot. At the same time, the decline was uneven: some issuers fell heavily, others did not fall at all.
The Russian Eurobond market stands out due to sanctions and the inability of many issuers to place new debts. Most of the issued securities ended up on the bank's balance sheet, which led to a decrease in profitability. Now there are about 104 credit default swaps (CDS) in Russia, that is, the cost of its insurance against default is about 1% per year - the lowest since 2008, even before the crisis. This means that Russian Eurobonds may fall more than others if the global correction continues. The second point is that Russian securities now do not seem attractive in terms of risk/reward ratio. On the global market, you can find Eurobonds with better credit quality and higher yields. For example, now the yield of subordinated Eurobonds of UBS is higher than that of comparable securities of Sberbank, such cases are extremely rare in the market. Although the risk of restricting operations with government debt has passed, the threat of sanctions against individual corporate issuers remains.
The recent upgrade of Russia's credit rating to investment grade has not actually changed anything. Officially, Russian securities were classified as high-yield, but in fact, in terms of profitability and spreads, they have long been traded as investment-grade securities. So, the yield of 10-year Turkish bonds is now 5.7%, Mexican - 4.25%, Russian-4.3%. At the same time, we see that the rating of Mexican bonds has risen to BBB+, Turkish - to BB+, and Russian- only to BBB -.