international bond market ppt
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SUBJECT:
Global Capital Markets
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K.E.S. SHROFF COLLEGE OF
ARTS & COMMERCE
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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
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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
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www.wikipidia.com
www.Google.com
www.mint-media.com
Global Capital Markets TY.BFM – Vipul
Foreign exchange market TY.BFM- Vipul
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BIBLOGRAPHY
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THANK Y
OU!