Eurobond

Definition

A Eurobond is a debt security issued in one country that pays interest and principal in a currency different from the issuer’s home currency. The term refers only to issuance outside the currency’s home-country borders — it does not imply issuance in Europe or denomination in euros (for example, a U.S. dollar–denominated bond issued in Japan is still a Eurobond).

Key takeaways

• Eurobonds let issuers raise capital in a currency other than their domestic currency.
• They are often grouped by denomination (e.g., eurodollar, Euro‑yen).
• Many Eurobonds historically traded in bearer form and were unregistered.
• Issuance is common for multinational firms, sovereigns, supranational organizations, and many emerging‑market borrowers.

How Eurobonds work

• Issuance is usually arranged by an international syndicate of financial institutions; one or more members may underwrite the issue, guaranteeing the sale.
• Denominations and maturities vary; single issues can exceed $1 billion, and maturities commonly range from five to 30 years (a large share matures in under 10 years).
• Eurobonds trade in international capital markets and generally offer high liquidity and relatively small par values for retail accessibility.

Delivery and registration

Eurobonds were originally delivered physically but are now typically issued electronically through systems such as the Depository Trust Company (DTC) in the United States and CREST in the United Kingdom. Historically, many Eurobonds were issued in bearer form, meaning ownership was evidenced by physical possession rather than registration; bearer issuance has implications for taxation and regulatory oversight.

History

The first Eurobond was issued in 1963 by Autostrade (the company that operated Italy’s national highways). It was a $15 million eurodollar bond arranged in London, issued at Amsterdam’s Schiphol Airport, and paid in Luxembourg — structured to appeal to European investors seeking dollar‑denominated assets.

Market size and trends

The global bond market exceeds $100 trillion in outstanding debt. Because many Eurobonds have been unregistered or bearer instruments, exact totals are hard to determine, but Eurobonds likely represent a substantial portion of the international market (estimates around 30%). Issuance from emerging‑market governments and corporations has grown as borrowers seek access to deeper, more liquid capital markets.

Advantages

• Flexibility to choose currency and country of issuance based on regulatory, tax, and interest‑rate considerations.
• Access to a broader investor base and deeper capital markets than some domestic markets can provide.
• High liquidity and often lower par values make them accessible to a range of investors.

Disadvantages and risks

• Bearer or unregistered forms can complicate tax reporting and regulatory oversight, and may enable tax avoidance.
• Currency risk for issuers and investors if revenues and obligations are in different currencies.
• Political, legal and settlement‑system risks when issued across borders.

Conclusion

Eurobonds are a key instrument in international debt markets, offering issuers currency and market flexibility and providing investors with diversified fixed‑income exposure. Their structure, registration status, and cross‑border nature create both opportunities and distinct risks that market participants must evaluate.