The Banking Executive Magazine - July 2024 Issue

INTRODUCTION The recent European Union Elections in June 2024 had a great impact on global markets including the Eu- robond market. This article presents an overview of Eurobonds covering benefits, risks, types, regulations, markets and history of Eurobonds. The article sheds light on the latest development in the global Eurobond market. The size of the EU bond mar- ket is analysed. Eurobonds issued by Saudi Arabia, Qatar, United Arab Emirates and Lebanon are examined. The impact of the European Union EU 2024 election on the Eurobond market is assessed with an outlook on EU digital future towards financ- ing defence technologies and the rise of EU defence Eurobonds. The article concludes with recommendations for Arab investors and issuers of Eu- robonds. OVERVIEW OF EUROBONDS Eurobond is a type of bond that is is- sued in a currency that is different from the currency of the country where it is issued. These bonds are typically issued by multinational cor- porations or governments and are denominated in a currency other than the one in which they are is- sued. Eurobonds are typically issued in the international market and are not sub- ject to the regulations of any single country. This allows issuers to access a larger pool of investors and poten- tially lower borrowing costs. Eu- robonds are usually issued in large denominations and have maturities ranging from a few years to several decades. Benefits of Eurobonds. One of the main benefits of Eurobonds is that they allow issuers to diversify their sources of funding and access a wider range of investors. Eurobonds also provide investors with the op- portunity to invest in different curren- cies and markets, which can help to spread risk. Risks of Eurobonds. While Eu- robonds can offer benefits in terms of diversification and access to a larger investor base, they also come with risks. These risks can include cur- rency risk, interest rate risk, and po- litical risk, among others. Investors should carefully consider these risks before investing in Eurobonds. Types of Eurobonds. There are several different types of Eurobonds, including fixed-rate bonds, floating- rate bonds, zero-coupon bonds, and convertible bonds. Each type of Eu- robond has its own unique features and characteristics, so investors should carefully consider their in- vestment objectives and risk toler- ance before investing in any particular type of Eurobond. Market for Eurobonds. The market for Eurobonds is a global market, with bonds being issued and traded in various financial centers around the world. The Eurobond market is known for its liquidity and depth, making it an attractive option for both issuers and investors looking to access the international capital mar- kets. Regulation of Eurobonds. Eurobonds are typically not subject to the same regulations as domestic bonds, as they are issued in the international market. This can make Eurobonds an attractive option for issuers looking to raise capital without being subject to the regulatory requirements of a particular country. HISTORY OF EUROBOND MARKET The Eurobond market began with the Autostrade issue for the Italian mo- torway network in July 1963. It was for United States US$15m with a 15 year final maturity and an annual coupon of 5½%. The cross-border debt capital market continues to bring together borrowers and in- vestors from all over the world and meets the funding needs of countries, supranational organisations, finan- cial institutions and companies. Eurobonds Global Market ISSUE 187 JULY 2024 the BANKING EXECUTIVE 9 1963 First Fixed rate issue: Autostrade 1969 Launch of Association of International Bond Dealers (AIBD) 1969 Launch of Euromoney 1969 Euro-clear established (forerunner of Euroclear) 1970 Cedel established (forerunner of Clearstream) 1970 First Floating Rate Note: ENEL 1979 First bought deal: GMAC 1981 First swap: IBM/IBRD 1989 Fixed price reoffer introduced 1989 First global bond: World Bank 1992 Association of International Bond Dealers (AIBD) changes name to International Securities Market Association (ISMA) 1994 First CDS: Exxon/EBRD 1999 Pot deal introduced 1999 Euro introduced in 12 countries forming the Eurozone 2005 International Securities Market Association (ISMA) and International Primary Market Assocation (IPMA) merge to form International Capital Market Association (ICMA) 2007 Global credit crisis starts 2008 Lehman’s default 2010 European sovereign debt crisis starts 2013 50th Anniversary of the Eurobond Market History of the Eurobond Market Source: International Capital Market Association ICMA