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INTERNATIONAL FINANCIAL MARKET

INSTRUMENTS

Presented by:-

NILESH SEN

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Types

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

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Types

Short & medium term instruments Euro notes Euro commercial paper Medium term euro notes

OTHERS

ADR GDR

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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.

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DIFFERENCES

If an Indian company issue bond in the New-York and bond is dominated in US dollar, such Bonds are called foreign bonds.

Foreign bonds underwritten by the underwriters of the country where they issued.

But in case of euro bonds they are dominated in currency other than the currency of the country where the bonds are issued.

Euro bonds underwritten by the underwriters of multi nationality

Foreign Bond Euro Bond

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DIFFERENCES

Foreign bonds subjected to governmental rules and regulations

Foreign bonds is determined keeping in mind the investors of a particular country.

Euro bonds are free from rules and regulations.

Euro bond are tailored to the needs of the multinational investors.

Foreign Bond Euro Bond

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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

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Global bonds

Bonds that can be offered within the euro market 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.

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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

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Straight bonds

Interest rate is fixed known as coupon rate It is a traditional type of bond

Its varities:- -Bullet-redemption bond -Rising-coupon bond -Zero-coupon bond -Currency options -Bull and bear bonds. -Debt warrant bonds

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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

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Convertible bonds

Convertible into equity shares Some convertible bonds have detachable warrants

involving acquisition rights Automatic convertibility into a specified number of

shares.

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Cocktail 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.

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Euro notes

Like PNs for obtaining short term funds. Denominated in any currency other than the

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.

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Euro commercial notes

A short-term, debt instrument Corporations issue euro commercial papers in

order to tap into the international money markets for their financing.

An example of a euro commercial paper is a British firm issuing debt in U.S. dollars to encourage investment from dollar-investors in international money markets.

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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 underwriting.

It carry fixed interest rate

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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

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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 related shares.

Very similar to GDR's are ADR's.

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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

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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.

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