SUBJECT:

Global Capital Markets

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K.E.S. SHROFF COLLEGE OF

ARTS & COMMERCE

Class : T.Y.B.F.M. Semester : 5 th

 Presentation On :

International Bond Market

Guided By : Prof.Pallav Shah

Academic Year : 2012-13

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NAME ROLL NO.

Bhavik Parmar 28

Sonu Pethani 32

Harsh Sanghavi 34

Shashank Pai 26

Vaishali Rawal 36

Dharmik Patel 30

GROUP MEMBERS

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The bond market is a financial market where participants buy and sell debt securities , usually in the form of bonds.

The bond market primarily includes:-

I) Government-issued securities.

II) Corporate debt securities.

WHAT IS BOND MARKET ?

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A bond issued in a country or currency other than that of the investor or broker. They include Eurobonds, which are issued in a foreign currency, foreign bonds, which are issued by a foreign government or corporation in the domestic market, and global bonds, which are issued in both domestic and international markets.

INTERNATIONAL BOND IS FURTHER CLASSIFIED IN THREE TYPES

1) Domestic Bond

2) Euro Bond

3) Foreign Bond

MEANING OF 'INTERNATIONAL BOND'

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1) It is a debt market

2) It is a fund raising market

3) Fixed income instrument

4) Issued in foreign currency

5) It channelizing savings

FEATURES OF INTERNATIONAL BOND

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Step 1:-A borrower will contact an investment banker.

Step 2:- The lead manager will invite other banks.

Step 3:-The managing group and banks will serve as underwriters for the underwriter issues.

Step 4:-The various members of the underwriting syndicate receive a portion of the spread.

Step 5:-The lead manager receives the full spread.

THE COMMON PROCESS OF ISSUING BOND

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1) Straight Fixed-Rate

2) Floating-Rate Note

3) Convertible Bond

4) Straight Fixed-rate with equity warrants

5) Zero coupon bond

6) Dual-Currency bond

INSTRUMENTS OF INTERNATIONAL BOND MARKET

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1) Inflation Risk

2) Interest Rate Risk

3) Default Risk

4) Downgrade Risk

5) Liquidity Risk

6) Reinvestment Risk

7) Rip-off Risk

RISK OF INVESTING IN BOND

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ADVANTAGES & DISADVANTAGES OF

INTERNATIONAL BOND

Advantages

Diversify your portfolio

International fund raising instrument

Fixed income market

Investment avenue(short term as well as long term)

Disadvantages

Outperformed by Mutual Funds

Fees

Risk

Limited Selection

CHARACTERISTICS OF INTERNATIONAL BOND MARKET

INSTRUMENTSInstruments Frequency of

Interest paymentSize of Interest payment

Pay off at Maturity

Straight Fixed-Rate Annual Fixed Currency of issue

Floating-Rate Note Quarterly or Semi-annual

Variable Currency of issue

Convertible Bond Annual Fixed Currency of issue or conversion to equity share

Straight Fixed-rate with equity warrants

Annual Fixed Currency of issue plus equity shares from exercised warrants

Zero coupon bond None Zero Currency of issue

Dual-Currency bond Annual Fixed Dual currency

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INTERNATIONAL BOND AMOUNTS OUTSTANDING BY MAJOR INSTRUMENTS

INSTRUMENTS Dec. 2008 Dec. 2009 March 2010

Straight fixed-rate 14428.4 17274.2 17235.9

Floating-rate note 7892.0 8357.2 7988.8

Straight fixed-rate with equity warrants

396.7 447.2 446.1

Total 22717.1 26078.6 25670.8

Billions of US Dollars

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INTERNATIONAL BOND AMOUNTS OUTSTANDING BY MAJOR ISSURES

ISSURES Dec. 2008 Dec. 2009 March 2010

Financial Institutions 17,925.70 20,030.10 19,531.10

Governments 1,794.60 2,232.20 2,254.40

International Organizations 637.90 791.50 814.10

Corporate Issuers 2,359.00 3,024.70 3,071.20

Total 22717.20 26078.50 25670.80

Billions of US Dollars

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INTERNATIONAL BOND AMOUNTS OUTSTANDING BY MAJOR CURRENCIES

CURRENCIES Dec. 2008 Dec. 2009 March 2010

Euro 10873.9 12387.6 11813.8

US Dollar 8215.1 9429.0 9718.1

Pound Sterling 1701.8 2145.5 2028.3

Yen 746.7 693.9 668.7

Other 1179.7 1422.5 1441.9

Total 22717.2 26078.5 25670.8

Billions of US Dollars

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Bonds help acquire orders and, in many cases, are a precondition for successful conclusion of a contract.

For all entrepreneurs planning to enter tenders and conclude contracts for the delivery of goods or services we offer a wide range of domestic contract bonds.

MEANING OF DOMESTIC BOND

Bonds  issued in the country and currency in which they are traded. Unlike international bonds, domestic bonds are not subject to currency risk. They usually carry less risk, as the regulatory and taxation requirements are usually known to investors in domestic bonds, or at least to their brokers and accountants.

WHAT IS DOMESTIC BOND

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Public Sector Undertaking Bonds

Corporate Bonds

Financial Institutions and Banks

Emerging Bond Markets

Tax-Savings Bonds

TYPES OF DOMESTIC BOND

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WHAT IS EUROBOND ?

A euro bond is a debt contract between a borrower and an investor, which records the borrower's obligation to pay interest and the principal amount of the bond on specified dates.

For example-A firm issuing Yen bonds outside Japan . When a Japanese firm issues yen bonds in the Euro market.

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1) Select a Lead Manager:- The borrower chooses one investment bank to be the lead manager of the bond issue.

2) Organize a Syndicate:- The lead manager negotiates with other banks to form managing group. This group then negotiates the terms of the bond issue with the borrower.

3) Selling the Bonds:-Once the syndicate is formed and the terms of the issue are agreed upon, the managing group buys the bonds from the borrower. The managing group then sells the euro bonds to the underwriters.

4) Principal Paying Agent:-A agent or trustee may also be appointed by the borrower to handle the paperwork and legal aspects of the euro bond issue and act as principal agent.

THE PROCEDURE FOR THE EUROBOND

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1) Coupon (The Interest Rate)

2) Maturity

3) Issuer

4) Secondary Market

5) Ratings

6) Taxation

7) A Eurobond is only for Medium and Long-term

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UNIQUE CHARACTERISTICS OF EUROBOND

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Large amounts

Freedom and Flexibility

Lower cost of issue

Lower interest cost

Longer maturities

Advantages Disadvantages

There are issue costs to take into account.

If the debt is not matched firm may have to be open to foreign exchange risk.

ADVANTAGES & DISADVANTAGES FOR COMPANIES TO ISSUE

EUROBONDS

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Advantages Disadvantages

Not a good idea for investors who may need a repayment.

There is always the risk defaulter.

Tax free income

Low Risk investment

Convertible to Equity

Liquid investment

ADVANTAGES & DISADVANTAGES FOR INVESTOR TO ISSUE EUROBONDS

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INTRODUCTUON ON FOREIGN BOND

Foreign bonds are regulated by the domestic market authorities and are usually given nicknames that refer to the domestic market in which they are being offered.

A foreign bond allows an investor a measure of international diversification without subjection to the risk of changes in relative currency values.

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Foreign Bond market Euro Bond market

Issuer-Any borrower with credit standing explicit rating rate

Currency-Any widely used by international country

Amount raised in single issue-Typically US $50-500 Millions

Type-Bearer

Interest payment-Annual for fixed rate bond and quarterly for FRN’s

Listing-Usually London Luxembourg

Investor-Wide international profile. Private individual play a major role

Issuer-Foreign government or corporation or international institution US-SEC-Register

Currency-Local currency

Amount raised in single issue-Typically US $50-500 Millions

Type-Bearer expect , in Bulldog and Yankee markets

Interest payment-As in corresponding domestic market

Listing-Foreign stock exchange

Investor-Domestic and overseas

DISTINCTION

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CONCLUSION

www.wikipidia.com

www.Google.com

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Global Capital Markets TY.BFM – Vipul

Foreign exchange market TY.BFM- Vipul

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BIBLOGRAPHY

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THANK Y

OU!