Eurobonds Frequently Asked Questions (FAQs)

A Eurobond is a financial instrument utilised by issuers/borrowers who want to address funding needs through the international markets. As such, they transcend national borders. Eurobonds offer optionality in the law governing the security itself, with a choice between the law of the jurisdiction of the issuer or a jurisdiction of choice (50+ governing laws are currently supported). They can be issued in a range of different currencies (100 currencies are supported). Eurobonds target investors based around the globe making it a truly global financing tool. They are issued directly through one of the International Central Securities Depositories (ICSDs) i.e. Euroclear Bank and Clearstream Banking Luxembourg.

In terms of identification, when the Eurobond is a fixed income instrument and is issued directly in the ICSD model, it can be recognised by the ‘XS’ ISIN prefix. Equity-type Eurobonds (due to their product characteristics) will have an ISIN prefix matching the country of incorporation of the issuer.

Eurobonds represent a significantly wide range of instrument types, typically between 350K and 500K issuances a year, including fixed income instruments such as commercial paper, medium-term notes and bonds, equity-type instruments such as warrants. The ICSD model is also used for other instruments such as structured products, ETFs, Depository Receipts, Collective Investment Vehicles and funds.

In order to issue a Eurobond, issuers can rely on a well-established ecosystem of advisors who will assist in the arranging, marketing, issuance and settlement of the bonds. This ecosystem of advisors consists of Law Firms, Investment Bankers (acting as dealers or Lead Managers) and various Issuer Agents with the Issuing and Principal Paying Agents having a key role in both the issuance and post-issuance asset servicing. Eurobonds can be issued on a standalone basis, or under a programme ‘revolving debt’ facility which provides a template for a series of separate issuances for which the specific details will vary. Speed and efficiency of issuance being the focus.

They can be distributed to the investors in a syndicated manner where a number of underwriters will distribute the newly created securities, or in a non-syndicated manner where a dealer will market the instrument to investors.

Borrowers in the Capital Markets utilise Eurobonds because of their unique properties and marketability. Eurobonds offer an unparalleled flexibility in choice of currency, type of security and jurisdiction. Eurobonds provide access to a vast international market of potential investors, allowing issuers to reach a wide range of investors across different geographies which represents a uniquely diverse funding base.

The Eurobond market is known for its deep liquidity, enabling investors to buy and sell securities with ease on an active secondary market. The ICSDs provide investors with a range of collateral and lending services for the eligible instruments. This enables investors to achieve capital efficiencies across exposures and parties, optimise their balance sheets, manage risk and liquidity, increase portfolio yields and reduce settlement failures.

As a wholesale investor, to invest in Eurobonds, you need to go through a broker or financial institution that offers access to the Eurobond market.

An example of a Eurobond is a bond issued by a Japanese company, denominated in US dollars, sold to investors in Europe with the product itself being directly issued in the ICSD model (i.e. Euroclear Bank and/or Clearstream Banking Luxembourg). This unique structure allows the issuer to access the international markets and investors globally, to diversify their portfolios.

The Eurobond market is extensive (and truly global in nature), with an outstanding amount of over €13.2 trillion. It includes more than 12,000 entities issuing Eurobonds across over 130 jurisdictions, indicating its significant global presence. In the course of a fiscal year, the ICSD model will support the issuance of between 350K and 500K new financial instruments.

Eurobonds are typically issued by corporations, governments and financial institutions seeking to raise capital in international markets. These issuers leverage the Eurobond market to access a diverse, global investor base.