Ch012-International-Bond-Market

Eun/Resnick4e143Eun&Resnick4eCHAPTER12InternationalBondMarketTheWorld’sBondMarkets:AStatisticalPerspectiveForeignBondsandEurobondsBearerBondsandRegisteredBondsNationalSecurityRegulationsWithholdingTaxesOtherRecentRegulatoryChangesGlobalBondsTypesofInstrumentsStraightFixed-RateIssuesEuro-Medium-TermNotesFloating-RateNotesEquity-RelatedBondsZero-CouponBondsDual-CurrencyBondsCurrencyDistribution,Nationality,andTypeofIssuerInternationalBondMarketCreditRatingsInternationalFinanceinPractice:HeinekenRefreshesEuromarketwithSpectacularUnratedBondsEurobondMarketStructureandPracticesPrimaryMarketSecondaryMarketClearingProceduresInternationalBondMarketIndexesSummaryMINICASE:SaraLeeCorporation’sEurobondsTheWorld’sBondMarkets:AStatisticalPerspective1Inanygivenyear,whatpercentofnewinternationalbondsarelikelytobeEurobondsratherthanforeignbondsa)80%b)45%c)25%d)15%Answer:a)ForeignBondsandEurobonds2A“foreignbond”issueisa)onedenominatedinaparticularcurrencybutsoldtoinvestorsinnationalcapitalmarketsotherthanthecountrythatissuedthedenominatingcurrencyb)oneofferedbyaforeignborrowertoinvestorsinanationalmarketanddenominatedinthatnation’scurrencyc)forexample,aGermanMNCissuingdollar-denominatedbondstoU.S.investorsd)b)andc)Answer:d)Eun/Resnick4e1443A“Eurobond”issueisa)onedenominatedinaparticularcurrencybutsoldtoinvestorsinnationalcapitalmarketsotherthanthecountrythatissuedthedenominatingcurrencyb)usuallyabearerbondc)forexampleaDutchborrowerissuingdollar-denominatedbondstoinvestorsintheU.K.,Switzerland,andtheNetherlandsd)AlloftheaboveAnswer:d)4Inanygivenyear,rightly80percentofnewinternationalbondsarelikelytobea)Eurobondsb)Foreigncurrencybondsc)Domesticbondsd)NoneoftheaboveAnswer:a)5“Yankee”bondsarea)dollar-denominatedforeignbondsoriginallysoldtoU.S.investorsb)yen-denominatedforeignbondsoriginallysoldinJapanc)poundsterling-denominatedforeignbondsoriginallysoldintheU.K.d)noneoftheabove.Answer:a)6“Samurai”bondsarea)dollar-denominatedforeignbondsoriginallysoldtoU.S.investorsb)yen-denominatedforeignbondsoriginallysoldinJapanc)poundsterling-denominatedforeignbondsoriginallysoldintheU.K.d)noneoftheabove.Answer:b)7“Bulldog”bondsarea)dollar-denominatedforeignbondsoriginallysoldtoU.S.investorsb)yen-denominatedforeignbondsoriginallysoldinJapanc)poundsterling-denominatedforeignbondsoriginallysoldintheU.K.d)noneoftheabove.Answer:c)BearerBondsandRegisteredBonds8A“bearerbond”isonethata)showstheowner’snameonthebondb)theowner’snameisrecordedbytheissuerc)possessionisevidenceofownershipd)a)andb)Answer:c)Eun/Resnick4e1459A“registeredbond”isonethata)showstheowner’snameonthebondb)theowner’snameisrecordedbytheissuerc)theowner’snameisassignedtoabondserialnumberrecordedbytheissuerd)botha)andb),orc)Answer:d)10U.S.securityregulationsrequireYankeebondsandU.S.corporatebondssoldtoU.S.citizenstobea)Municipalbondsb)registeredbondsc)bearerbondsd)noneoftheaboveAnswer:b)NationalSecurityRegulations11PubliclytradedYankeebondsmusta)MeetthesameregulationsasU.S.domesticbondsb)MeetthesameregulationsasEurobondsifsoldtoEuropeansc)MeetthesameregulationsasSamuraibondsifsoldtoJapanesed)NoneoftheaboveAnswer:a)12TheEurobondsegmentoftheinternationalbondmarket:a)Isroughlyfourtimesthesizeoftheforeignbondsegment.b)Hasconsiderablylessregulatoryhurdlesthantheforeignbondsegment.c)TypicallyhasalowerrateofinterestthatborrowerspayincomparisontoYankeebondfinancing.d)AlloftheaboveAnswer:d)WithholdingTaxes13U.S.corporationsa)Areallowedtoissuebearerbondstonon-U.S.citizensb)Arenotallowedtoissuebearerbondsc)AreallowedtoissuetreasurybondsbutnotT-billsd)NoneoftheaboveAnswer:a)Eun/Resnick4e146OtherRecentRegulatoryChanges14Shelfregistrationa)Allowsasetofbookshelvestoremainlevel.b)Allowsanissuertopreregisterasecuritiesissue,andthen“shelve”thesecuritiesforlatersale.c)Allowsaninvestmentbanktoincreasethefeestheychargebychargingforstorageofthe“shelved”securitiesd)Eliminatestheinformationdisclosurethatmanyforeignfirmsfoundobjectionableintheforeignbondmarket.Answer:b)15Rule144Aa)AllowsqualifiedinstitutioninvestorsintheUnitedStatestotradeprivateplacements.b)WasdesignedtomaketheU.S.capitalmarketmorecompetitivewiththeEurobondmarket.c)Primarily,butnotexclusively,impactsYankeebonds.d)Alloftheabove.Answer:d)GlobalBonds16A“globalbond”issuea)isaverylargeinternationalbondofferingbyseveralborrowerspooledtogetherb)isaverylargeinternationalbondofferingbyasingleborrowerthatissimultaneouslysoldinseveralnationalbondmarketsc)hashigheryieldsforthepurchasersd)hasalowerliquidityAnswer:b)17AglobalbondissuedenominatedinU.S.dollarsandissuedbyU.S.corporationsa)TradeasEurobondsoverseasb)TradeasdomesticbondsintheU.S.domesticmarketc)Botha)andb)d)NoneoftheaboveAnswer:c)18Globalbondissuesa)CansaveU.S.issuers15basispointsrelativetodomesticbonds,allelseequalb)TendtohaveincreasedliquidityrelativetoEurobondsordomesticbondsc)Havebeenpartiallyfacilitatedbyrule144Ad)AlloftheaboveAnswer:d)Eun/Resnick4e147TypesofInstruments19Intermsofthetypesofinstrumentsoffered,a)TheYankeebondmarkethasbeenmoreinnovativethantheinternationalbondmarketb)Theintern