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 Generally issued to public. Individuals and corporate/ institutions are lenders Euro Credit Borrowed from Banks. Banks 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

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

Context of Euro Bond CurrencyIssuer Domestic BondHomeHome Resident Foreign BondHomeForeign Entity Euro BondForeignHome Resident or Foreign Entity; either

Context of Euro Bond CurrencyIssuer Domestic BondHomeHome Resident Foreign BondHomeForeign Entity Euro BondForeignHome Resident or Foreign Entity; either

Coupon Rate Coupon Rate is the Interest Rate paid on face 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)

LIBOR London InterBank Offered 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

Types of Bond Straight Bond Zero Coupon Bond ZCB Deep Discount Bond DDB Bond with Option – Callable Bond – Putable Bond Bond with Warrant

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

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

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

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

Bond with Warrant Warrant giving Right to buy equity shares on priority basis Extra “Carrot” to make bonds attractive

Junk Bond High Interest Rate

Petrodollars Dipak Abhyankar

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.

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.

OPEC Organization of Petroleum exporting countries

PetroDollar Recycling

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