614 CHAPTER 16. INTERNATIONAL FIXED-INCOME MARKETS
Table 16.3:Relationships between international banking products and se-
curities
Banking Securities
Short-term
Money Market Commercial Paper (CP) Market- short-term loan –CPissue
- short-term credit line –CPprogram
- rolled-over credit line – note issuing facility (NIF)
- revolving commitment – revolving underwritten facility (RUF)
- FF, FRA – interest-rate futures
Medium- and Long-term
Longer-term loans Notes and Bonds - fixed-rate loans – fixed-rate bond
- revolving or floating-rate (FR) loan – floating-rate note (FRN)
- FRloan with cap – HIBO (higher-bound) bond
- FRloan with floor – LOBO (lower-bound) bond
16.2.1 Why Eurobond Markets Exist
The explanations for the long-term success of international securities markets are
largely similar to the ones cited for eurocurrency markets:
Lighter regulation for international public issuesA bond issue aimed at the
general public of one particular country is subject to many rules and regulations
(although less so now than in the fifties and sixties). There are usually all kinds of
publication requirements, and the issue has to be examined and approved by one or
more regulatory agencies. In many countries, there are or were also issuing calendars
(and, hence, queues) because the local government does not want foreigners to affect
the country’s reserves, money supply, or exchange rate; nor does the government
want foreigners to “crowd out” local borrowers—especially not the government it-
self. By contrast, “international” transactions tend to be less regulated. For one
thing, monetary authorities and capital market regulators are less concerned with
issues that do not involve their own currencies and are targeting a few, well-off and
well-informed investors or (even better:) foreign investors. This lack of regulation
is especially true for tax-haven states that are often used as launching pads for
international issues, but they also hold forprivate issuesin mainstream countries.
Swift and efficient private placementBy traditionalusstandards, publication
requirements in Europe were never very stringent, and no rating is required for euro-
issues. Even these comparatively lax requirements can be largely or entirely avoided
if the issue is private rather than public. For loans privately placed with a limited
number of professional investors, there is no queuing, and there are no (or almost no)
disclosure requirements. In theeu, for instance, the telling feature is whether face
values ofeur50,000 or less are being offered; if so, the issue is deemed to be targeted
at retail investors rather than professionals, and a prospectus must be published,