Tuesday, July 16, 2013

Types of Bond Issuer

A firm can issue a bond either in its home country or in another country. Bonds that are sold to local investors in another country’s bond market are known as foreign bonds. Foreign bonds have a variety of nicknames: A bond sold by a foreign company in the United States is known as a Yankee bond; a bond sold by a foreign firm in Japan is a samurai.

To raise money through issuing bond, the publicly traded corporation needs to register with the regulator of that country, for example in the US, if the IBM corporation issuing bond in the US, it will register with Securities Exchange Commission(SEC) before the bond can be publicly bought and sold by large financial institutions.

 The bonds that are issued outside the US by IBM Corporation are not subject to register with SEC.this is the international issuing bonds which are Eurobond. And Eurobonds are made in one of the major currencies, such as the U.S. dollar, the euro, or the yen. Eurobond issues are marketed by international syndicates of underwriters, such as the London branches of large U.S., European, and Japanese banks and security dealers.

These days very large bond issues are often marketed both internationally (in the Eurobond market) and in individual domestic markets. For example, IBM could sell its dollar bonds internationally and also register the issue for sale in the United States. Such bonds are called global bonds.

Types of Issuer – there are three issuers of bonds:

(1)  The federal government and its agencies

(2)  Municipal governments

(3)  Corporations

Sectors of the U.S. Bond Market

  • ·         Treasury sector – securities issued by the U.S. government

  • ·         Agency sector – securities issued by federally related institutions and government-sponsored enterprises

  • ·         Municipal sector – securities issued by state and local governments bonds

  • ·         Corporate sector – securities issued in the U.S. by U.S. corporations and foreign corporations

  • ·         Asset-backed sector – securities backed by a pool of assets

  • ·         Mortgage sector – securities backed by mortgage loan               

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