Conventional eurobonds consist of s

Conventional eurobonds consist of straights and convertibles. Straights are normal bonds that carry unquestioned rights to the repayment of principal at a specified future date and to fixed interest payments on stated dates. They do not carry rights to any additional interest, principal or conversion privilege. Convertibles are bonds which can be converted from one form into another. In euromarket usage, the conversion is into ordinary shares at a specified future date and at a pre-determined price set when the bond is issued (usually at a premium to the current share price). Interest rates are usually lower on convertibles because lenders are attracted by the possibility of being able to buy shares at a favourable price.
In recent years, many other forms of securities have developed. These have included floating rate eurobonds and dual currency bonds. Floating rate eurobonds are popular with investors seeking the protection of capital. Interest rates are re-fixed every three or six months, removing the threat to capital value posed by very volatile interest rates. Thus, most floating rate eurobonds are bought by banks anxious to lock into assets with a yield greater than, but calculated in the same way as, the cost of their funds in the money markets: as in the case of rollover eurocurrency loans, floating rate eurobonds generally have their coupons set in terms of a percentage margin over LIBOR or another basis rate.
Issues of floating rate eurobonds (floaters) grew greatly during the 1980s, largely due to the increased need for banks to buy assets with low credit risk as other lending, notably sovereign lending to developing countries, became more risky. At the same time, many borrowers have found floaters a much cheaper form of borrowing than syndicated credit and have used them to repay their loans early. This has added to the banks’ demand for them by taking other loans off their books. The average life of issues increased from 9.7 years in 1978 to over 12 years by 1984, partly as a result of the issue of perpetuals with no final maturity. Many variations on floating rate eurobonds have developed, including flip-flop options which allow the investor to switch from undated perpetuals into a four-year floater paying a lower rate of interest while maintaining the right to switch back again into the perpetual issue.
Dual currency bonds are usually issued in a currency other than US dollars (most commonly Swiss francs), with the coupon denominated in that currency but the bond repayable in dollars. The coupon interest rate is usually greater than it would otherwise be because the lender assumes a forex risk. For example, consider a oneyear Australian dollar bond with an option to repay in US dollars. Assume a current exchange rate of $A1 = US$0.74, an exercise price of 76 cents and a coupon rate of 7 per cent against the 4 per cent available on an ordinary one-year bond. If, at the end of the year, the Australian dollar has appreciated, the borrower will repay in US dollars; if it has depreciated, repayment will be in Australian dollars. Reverse dual currency bonds have also been issued, with the bond payable and the coupon rate denominated in US dollars but repayable in other currencies. Sometimes borrowers are given the option to repay in any one of a number of currencies.
Among the great variety of instruments and techniques developed in recent years, perhaps the most interesting has been swaps. These are exchanges of cash flows that originated as attempts by firms to manage their asset/liability structure or to reduce their cost of borrowing. Cash flows generated by many different types of financial instrument may be swapped. Simple swaps such as interest rate and currency swaps are known as plain vanilla swaps. There are many variations on these.
An agreement to exchange periodic payments related to fixed
interest rates on a notional capital sum with those representing a floating rate on the same sum in the same currency.
Closely related to the interest rate swap is the basis rate swap, which involves the exchange of one type of floating rate for another. This can happen because, as we have seen, a floating rate of interest is always expressed in two parts: a general floating rate of interest that reflects the rate at which banks themselves obtain their money (the basis rate) plus a fixed rate spread that is specific to each loan. We have seen that the most commonly used basis rate in the London market is LIBOR (the London Inter Bank Offered Rate). However, other rates may be used as the basis rate of a floating rate loan, notably the US dollar prime rate and now, since the establishment of the European Central Bank, EURIBOR. Thus, a basis rate swap may involve the exchange of LIBOR for the US dollar prime rate in the calculation of the interest rate payable on a loan. Let us take an example of an interest rate swap. A company wishing to borrow will normally choose to do so in the market in which it can raise funds most easily, perhaps from a bank with which it has done a good deal of business in the past. We shall assume that this is a floating rate loan. However, the funds are being raised to undertake a long-term investment project and the firm, in order to be confident that the project is economically viable, would like to know the interest rate it is going to have to pay. That is, it would prefer a fixed rate loan. Thus, it enters into an agreement to pass the liability (the interest payment) on to another borrower in exchange for the fixed rate structure that best suits it. Swaps such as these are guaranteed by banks, often referred to as swap or hedging banks. The swap banks do not lend anything in these transactions and so they do not affect the banks’ assets and liabilities and thus constitute ‘off balance sheet’ business.
All that the swap bank does is to bear the risk that one of the parties to the deal might default on its payments, leaving the bank partially liable for the interest payments left unpaid by the defaulting borrower. Interest rate swaps work because different intermediaries in the capital market do not always view a borrower in the same way. Thus, our original firm may have been able to obtain a fixed rate loan by issuing a straight eurobond – but, if the firm was not well known to the market, the interest rate may have been higher than it could manage by borrowing on floating rate terms from its own bank and swapping interest rate structures with another firm. Box 10.5 provides an example of an interest rate swap. This example is one in which payments are swapped, but receipts may also be swapped. Yet again, since the capital sums are only notional, it is possible to speculate on the possibility of an.
Box 10.5 An interest rate swap
A major defence industry supplier, Death Mines plc, wishes to borrow £1 million for twelve years at a fixed interest rate to finance a new investment project. It could do so by issuing a straight eurobond but, as it is not well known in the market and does not have a high credit risk rating, would have to pay a coupon of 8 per cent which it regards as too high. The firm’s own bank is willing to lend Death Mines the required amount via a one-year floating rate note at a rate of 2 per cent over LIBOR, currently at 3.6 per cent.
Clearly, the floating rate loan is much cheaper at the moment, but LIBOR could easily rise over the period of the loan to such a level that Death Mines would finish up losing on the project. Thus, it enters into a contract with a swap bank, Border International, to pay to it 5 per cent on the principal, receiving in exchange LIBOR.
The position of Death Mines now is:
Pays to its own bank LIBOR + 2 per cent
Pays to Border 5 per cent
Receives from Border LIBOR
Net position – fixed rate loan at 7 per cent
But what of Border International? It appears to be running a serious risk here.
However, it would have entered into the above contract only if it were at the same time entering into another contract with a counterparty which we shall assume to be a large US multinational, GM Foods Inc. GM Foods is a prime borrower and so can borrow on the eurobond market on the finest terms, but prefers a floating rate loan as it is willing to gamble on interest rates falling in the future. Thus, it issues a straight £500,000 eurobond with a coupon of 4.375 per cent. Then it enters into a contract with Border International to pay Border LIBOR in exchange for a fixed return of 4.75 per cent.
The position of GM Foods now is:
Pays on its straight eurobond 4.375 per cent
Receives from Border 4.75 per cent
Pays to Border LIBOR
Net position – floating rate loan at LIBOR − 0.375 per cent

Kết quả (Việt) 1:

EUROBOND thông thường bao gồm straights và convertibles. Straights là trái phiếu bình thường thực hiện không thể hỏi quyền để trả nợ của hiệu trưởng tại một ngày trong tương lai được chỉ định và thanh toán lãi suất cố định vào các ngày quy định. Họ không thực hiện quyền đối với bất kỳ bổ sung quan tâm, hiệu trưởng hoặc chuyển đổi đặc quyền. Convertibles là trái phiếu mà có thể được chuyển đổi từ một hình thức thành khác. Sử dụng euromarket, chuyển đổi thành cổ phần bình thường vào một ngày trong tương lai được chỉ định và ở một mức giá được xác định trước nằm khi các trái phiếu đã được ban hành (thường là ở một phí bảo hiểm để giá cổ phiếu hiện nay). Lãi suất thường thấp hơn trên convertibles bởi vì người cho vay được thu hút bởi khả năng của việc có thể để mua cổ phiếu ở một mức giá thuận lợi.Những năm gần đây, nhiều hình thức khác của chứng khoán đã phát triển. Đã có nổi tỷ lệ EUROBOND và trái phiếu thu kép. Nổi tỷ lệ EUROBOND được phổ biến với các nhà đầu tư tìm kiếm sự bảo vệ của thủ đô. Lãi suất tái cố định mỗi ba hoặc sáu tháng, loại bỏ mối đe dọa cho giá trị vốn đặt ra theo lãi suất rất dễ bay hơi. Do đó, hầu hết nổi tỷ lệ EUROBOND được mua bởi ngân hàng lo lắng để khóa vào các tài sản với một sản lượng lớn hơn, nhưng tính trong cùng một cách, như, chi phí của khoản tiền trong các thị trường tiền: như trong trường hợp các khoản vay eurocurrency tái đầu tư, nổi tỷ lệ EUROBOND thường có phiếu giảm giá của họ thiết lập trong điều khoản của một margin tỷ lệ phần trăm trong LIBOR, hay một cơ sở tỷ lệ.Các vấn đề của nổi tỷ lệ EUROBOND (floaters) đã tăng trưởng đáng kể trong những năm 1980, chủ yếu là do nhu cầu tăng cho các ngân hàng để mua tài sản với rủi ro tín dụng thấp như khác cho vay, đáng chú ý là có chủ quyền cho vay cho các nước đang phát triển, đã trở thành nguy hiểm hơn. Cùng lúc đó, nhiều người đi vay đã tìm thấy floaters hình thức vay rẻ hơn nhiều so với tín dụng cung cấp thông tin và đã sử dụng chúng để trả nợ khoản vay của họ sớm. Điều này đã thêm vào ngân hàng nhu cầu cho họ bằng cách tham gia các khoản vay khác ra sách của họ. Cuộc sống trung bình của vấn đề đã tăng từ 9,7 năm vào năm 1978 đến hơn 12 tuổi bởi năm 1984, một phần là kết quả của vấn đề perpetuals với không có kỳ hạn thanh toán cuối cùng. Nhiều biến thể nổi tỷ lệ EUROBOND đã phát triển, bao gồm cả flip-flop tùy chọn cho phép các nhà đầu tư để chuyển từ undated perpetuals vào một floater bốn năm thanh toán một tỷ lệ lãi suất thấp hơn trong khi duy trì quyền chuyển trở lại một lần nữa sự cố vĩnh viễn.Dual currency bonds are usually issued in a currency other than US dollars (most commonly Swiss francs), with the coupon denominated in that currency but the bond repayable in dollars. The coupon interest rate is usually greater than it would otherwise be because the lender assumes a forex risk. For example, consider a oneyear Australian dollar bond with an option to repay in US dollars. Assume a current exchange rate of $A1 = US$0.74, an exercise price of 76 cents and a coupon rate of 7 per cent against the 4 per cent available on an ordinary one-year bond. If, at the end of the year, the Australian dollar has appreciated, the borrower will repay in US dollars; if it has depreciated, repayment will be in Australian dollars. Reverse dual currency bonds have also been issued, with the bond payable and the coupon rate denominated in US dollars but repayable in other currencies. Sometimes borrowers are given the option to repay in any one of a number of currencies.Among the great variety of instruments and techniques developed in recent years, perhaps the most interesting has been swaps. These are exchanges of cash flows that originated as attempts by firms to manage their asset/liability structure or to reduce their cost of borrowing. Cash flows generated by many different types of financial instrument may be swapped. Simple swaps such as interest rate and currency swaps are known as plain vanilla swaps. There are many variations on these.An agreement to exchange periodic payments related to fixed
interest rates on a notional capital sum with those representing a floating rate on the same sum in the same currency.
Closely related to the interest rate swap is the basis rate swap, which involves the exchange of one type of floating rate for another. This can happen because, as we have seen, a floating rate of interest is always expressed in two parts: a general floating rate of interest that reflects the rate at which banks themselves obtain their money (the basis rate) plus a fixed rate spread that is specific to each loan. We have seen that the most commonly used basis rate in the London market is LIBOR (the London Inter Bank Offered Rate). However, other rates may be used as the basis rate of a floating rate loan, notably the US dollar prime rate and now, since the establishment of the European Central Bank, EURIBOR. Thus, a basis rate swap may involve the exchange of LIBOR for the US dollar prime rate in the calculation of the interest rate payable on a loan. Let us take an example of an interest rate swap. A company wishing to borrow will normally choose to do so in the market in which it can raise funds most easily, perhaps from a bank with which it has done a good deal of business in the past. We shall assume that this is a floating rate loan. However, the funds are being raised to undertake a long-term investment project and the firm, in order to be confident that the project is economically viable, would like to know the interest rate it is going to have to pay. That is, it would prefer a fixed rate loan. Thus, it enters into an agreement to pass the liability (the interest payment) on to another borrower in exchange for the fixed rate structure that best suits it. Swaps such as these are guaranteed by banks, often referred to as swap or hedging banks. The swap banks do not lend anything in these transactions and so they do not affect the banks’ assets and liabilities and thus constitute ‘off balance sheet’ business.
All that the swap bank does is to bear the risk that one of the parties to the deal might default on its payments, leaving the bank partially liable for the interest payments left unpaid by the defaulting borrower. Interest rate swaps work because different intermediaries in the capital market do not always view a borrower in the same way. Thus, our original firm may have been able to obtain a fixed rate loan by issuing a straight eurobond – but, if the firm was not well known to the market, the interest rate may have been higher than it could manage by borrowing on floating rate terms from its own bank and swapping interest rate structures with another firm. Box 10.5 provides an example of an interest rate swap. This example is one in which payments are swapped, but receipts may also be swapped. Yet again, since the capital sums are only notional, it is possible to speculate on the possibility of an.
Box 10.5 An interest rate swap
A major defence industry supplier, Death Mines plc, wishes to borrow £1 million for twelve years at a fixed interest rate to finance a new investment project. It could do so by issuing a straight eurobond but, as it is not well known in the market and does not have a high credit risk rating, would have to pay a coupon of 8 per cent which it regards as too high. The firm’s own bank is willing to lend Death Mines the required amount via a one-year floating rate note at a rate of 2 per cent over LIBOR, currently at 3.6 per cent.
Clearly, the floating rate loan is much cheaper at the moment, but LIBOR could easily rise over the period of the loan to such a level that Death Mines would finish up losing on the project. Thus, it enters into a contract with a swap bank, Border International, to pay to it 5 per cent on the principal, receiving in exchange LIBOR.
The position of Death Mines now is:
Pays to its own bank LIBOR + 2 per cent
Pays to Border 5 per cent
Receives from Border LIBOR
Net position – fixed rate loan at 7 per cent
But what of Border International? It appears to be running a serious risk here.
However, it would have entered into the above contract only if it were at the same time entering into another contract with a counterparty which we shall assume to be a large US multinational, GM Foods Inc. GM Foods is a prime borrower and so can borrow on the eurobond market on the finest terms, but prefers a floating rate loan as it is willing to gamble on interest rates falling in the future. Thus, it issues a straight £500,000 eurobond with a coupon of 4.375 per cent. Then it enters into a contract with Border International to pay Border LIBOR in exchange for a fixed return of 4.75 per cent.
The position of GM Foods now is:
Pays on its straight eurobond 4.375 per cent
Receives from Border 4.75 per cent
Pays to Border LIBOR
Net position – floating rate loan at LIBOR − 0.375 per cent