International financial

market instruments

Presented by:-
Vikesh Jha
Ranjit Singh
Jitendra Sahu
Types

International bonds
 Foreign bonds & euro bonds
 Global bonds
 Straight bonds
 Floating rate notes
 Convertible bonds
 Cocktail bonds
Types

Short & medium term instruments

 Euro notes
 Euro commercial paper
 Medium term euro notes

 OTHERS

 ADR
 GDR
Foreign bonds & euro bonds

Foreign bonds are underwritten by the

underwriters of the country where they are
issued
Maturity based on the need of investors of a
particular country.
Foreign bonds are subjected to government
regulations in the country where they are
issued.
DIFFERENCES

 If an indian company issue bond in the new york

and bond is dominited in US dollar, is called
foreign bonds. But in case of euro bonds they
are dominited in currency other than the
currency of the country where the bonds are
issued.
 Foreign bonds underwritten by the underwriters
of the country. Euro bonds underwritten by the
underwritters of multi nationality
DIFFERENCES

 Foreign bonds subjected to governmental

rules and regulations but euro bonds are free
from rules and regulations.
 Foreign bonds is determined keeping in mind
the investors of a particular country. On
 the other hand euro bond are tailored to the
needs of the multinational investors.
Global bonds

 First it issued in 1989 by world bank

 It also issued by the company
 It dominated in 7 country’s currency
 Australian dollar
 Canadian dollar
 Japanese yen
 Swidish crona
 Euro
Global bonds

Bonds that can be offered within the euromarket

and several other markets simultaneously.

 Unlike Euro bonds, global bonds can be issued in

the same currency as the country of issuance.

 For example, a global bond could be both issued in

the United States and denominated in U.S. dollars.
Features

Eurobonds
 underwritten by an internationally.
 offered simultaneously to investors in a number of
countries .
 issued outside the jurisdiction of any single country.
 they are not registered through a regulatory
agency.
 Make coupon payments annually.
 Large in size offered for simultaneous placement in
different countries
Straight bonds

Interest rate is fixed known as coupon rate

It is a traditional type of bondi
Its varities:-
-Bullet-redemption bond
-Rising-coupon bond
-Zero-coupon bond
-Currency options
-Bull and bear bonds.
-Debt warrant bonds
Floating rate notes

 Does not carry fixed rate of interest

 Interest quoted as a premium or discount to a
reference rate(LIBOR)
 Interest rate revised periodically.
 Perpetual FRNs
 Minimax FRN
 Drop lock FRN
 Flip flop FRN
 Mismatch FRN
 Hybrid fixed rate reverse FRN
Convertible bonds

Convertible into equity shares

Some convertible bonds have detachable
warrants involving acquisition rights
Automatic convertibility into a specified
number of shares.
Coctail bonds

Denominated in a mixture of currencies.

Represent a weighted average of 5 currencies
Investors get currency diversification risk
Depreciation offset by appreciation of other.
Euro notes

 Like PNs for obtaining short term funds.

 Denominated in any currency other thanthe
currency of the country where they are
issued.
 Documentation facilities are minimum.
 Represent Low cost funding route.
 Investor too prefer them in view of short
maturity.
Euro commercial notes

A short-term, debt instrument

Corporations issue eurocommerical papers in
order to tap into the international money
markets for their financing.

 An example of a eurocommercial paper is a

British firm issuing debt in U.S. dollars to
encourage investment from dollar-investors
in international money markets.
Medium term euro notes

 Longer maturity between 1 year to 5 years.

 Short term euro notes are allowed to roll
over.
 Issued to get medium term funds in foreign
currency without any need for redemption
and fresh issue.
 It is not underwritten yet there is provision for
underwritting.
 It carry fixed interest rate
ADR’S

 Represents ownership in the shares of a non-U.S.

company that trades in U.S. financial markets
 ADRs carry prices in US dollars,
 pay dividends in US dollars,
 And can be traded like the shares of US-based
companies.
 JPMorgan Citibank
 Deutsche Bank
 Bank of New York Mellon
GDR’S
 Global Depository Receipt (GDR) - certificate issued
by international bank, which can be subject of
worldwide circulation on capital markets.
 GDR's are emitted by banks, which purchase shares
of foreign companies and deposit it on the accounts.
 Global Depository Receipt facilitates trade of shares,
especially those from emerging markets.
 Prices of GDR's are often close to values of realted
shares.
 Very similar to GDR's are ADR's.
Procedure of issue
 Deciding the size of the issue , the market of the
issue , price of the issue and the formalities involved.
 Approaching a lead manager
 Fulfilling the formalities and preparing the
prospectus.
 Depositing shares to be issued with the custodian
 Custodian asks depository located in foreign country
to issue DR
 Proceeds flow from depository to custodian bank to
issuing company
Documentation

 1. The prospectus
 2.The depository agreement
 3. The agreement between the custodian and
depository.
 4.The underwriting agreement
 5. A copy of the agreement with the listing
stock exchange.