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Eurobonds

Some international bond funds invest in eurobonds. These are bonds with a par value of $100,000 or more that are offered for sale outside of the issuer's home country in a currency other than that of the home currency. Don't let the name confuse you, though. Although they're frequently sold in Europe, eurobonds aren't necessarily denominated in euros nor issued in a European country. It could be yen, or Australian dollars, or Swiss francs. For example, if the United Arab Emirates sells bonds in London denominated in pounds, those are eurobonds.

One kind of eurobond of particular interest to U.S. investors is the eurodollar bond: a eurobond issued in U.S. dollars. These bonds may even be issued by corporations based in the U.S. In fact, sometimes a U.S. company's eurodollar bond provides a higher yield, without currency risk, than its domestic bonds.

Eurobonds tend to have shorter maturities than comparable domestic U.S. bonds and offer a greater degree of call protection. While U.S. bonds can be called anytime after a day known as the call protection date, eurobonds can be called only on specific dates.


 
Jeffrey RosensweigJeffrey Rosensweig, Goizueta Business School, Emory University
 
         
   
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