Chapter 16
International Fixed-Income
Markets
In this chapter, we have a look at one source of financing for companies: international
money, loan, and bond markets. Related short-term fixed-interest products, like
deposits and short-term loans or commercial paper, are briefly touched upon. Other
related instruments, notably interest forwards and futures, were introduced in the
Appendices to Chapters 4 and 6.
These international fixed-interest markets used to largely coincide with what was
(and largely still is) calledeuromoney andeurobondmarkets, that is, markets for
banking products or bonds denominated in a currency that is not the official money
of the country where the loan was taken up or the bonds were issued. For example,
a Norwegian investor may depositusdnot in theusbut with a bank located outside
theus, for example, in Oslo or in London. Or a Peruvian company may issue bonds
in London and denominate them injpy.
The prefix “euro” became misleading when such extra-territorial markets also
emerged in e.g. Asia. One accordingly heard of Asiadollars, and so on. Since the
advent of the euro as a currency, the prefix has also become ambiguous: are we
talking about bonds expressed ineuror bonds issued outside the home turf of the
currency? Also, the term could lead to absurd combinations, like euro-euro foreur
bonds placed in London. There have been feeble attempts to find a new term;The
Economisteven invited suggestions from the public at large, and in the end backed
the by no means new “xeno” proposal (from greekξνoς, foreign). But the entire
prefix issue fizzled out on its own, since people no longer thought there was anything
special about setting up deals in a particular currency outside its original territory.
If ever the distinction is important to you, you can just add the adjective: everybody
will catch your drift. In most of this text I prefer to use “international”. The term
“offshore” might have done well, too, if it weren’t for the connotation with “having
a special tax status”, which is not what we have in mind right now.