Definition of 'Eurobond'
Eurobonds are often used by governments and corporations to raise capital in international markets. They can be used to finance a variety of projects, such as infrastructure development, public works, and corporate acquisitions. Eurobonds are also used by supranational organizations, such as the European Union, to raise capital for their operations.
Eurobonds are typically issued in large denominations, and they are often sold to institutional investors, such as pension funds and insurance companies. However, they are also available to retail investors through brokerage firms.
The interest rates on Eurobonds are typically higher than the interest rates on bonds issued in the domestic currency. This is because Eurobonds are considered to be riskier investments, as they are not subject to the same regulations as domestic bonds.
Eurobonds are a popular investment tool for investors who are looking for a high yield. However, they should be aware of the risks involved before investing in them.
Here are some of the advantages of investing in Eurobonds:
* High yields: Eurobonds typically offer higher yields than bonds issued in the domestic currency.
* Diversification: Eurobonds can help to diversify a portfolio and reduce risk.
* Liquidity: Eurobonds are typically liquid and can be easily sold if needed.
Here are some of the disadvantages of investing in Eurobonds:
* Risk: Eurobonds are considered to be riskier investments than bonds issued in the domestic currency.
* Currency risk: Eurobonds are denominated in a foreign currency, which can expose investors to currency risk.
* Credit risk: Eurobonds are issued by governments and corporations, and they are subject to credit risk.
Overall, Eurobonds can be a good investment for investors who are looking for a high yield and who are willing to take on some risk. However, investors should be aware of the risks involved before investing in them.
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