International borrowers have two main ways to raise money from investors abroad. The difference is about which market and which rules the bond is issued under.
| Type | What it is | Example |
|---|---|---|
| Domestic bond | Issued by a local borrower in the local currency under local rules. | A German company selling euro bonds in Germany. |
| Foreign bond | Issued by a foreign borrower in the local currency, in the local market and under that market's rules. | A Japanese company selling US-dollar bonds in the US market (a "Yankee" bond). |
| Eurobond | Issued internationally in a currency that is foreign to the place of issue, outside any single domestic regulatory system. | A Japanese company selling US-dollar bonds to investors through London. |
Nicknames for foreign bonds
- Yankee – US dollar bonds issued in the United States by foreign borrowers.
- Samurai – yen bonds issued in Japan by foreign borrowers.
- Bulldog – sterling bonds issued in the UK by foreign borrowers.
- Matador – bonds issued in Spain by foreign borrowers.
- Panda – renminbi bonds issued in mainland China by foreign borrowers.
- Kangaroo – Australian dollar bonds issued in Australia by foreign borrowers.
Why the distinction matters
A foreign bond must meet the disclosure, registration and tax rules of the host market. A Eurobond is usually documented under English or New York law, listed on an exchange chosen for convenience and settled internationally. That flexibility is the main reason the Eurobond market became larger than most foreign-bond markets.
In practice the lines have blurred. Many large deals are now "global bonds" sold simultaneously into the Eurobond market and a domestic market such as the US, using the same documentation.