Trivial Pursuit, Global Capital Markets Edition

♠ Posted by Emmanuel in at 5/21/2008 12:54:00 AM
One of the more striking phenomena to emerge in this age of financial globalization has been the ability of sovereigns and corporations to strategically issue debt in international capital markets. This is usually done for tax purposes, although interest rate differentials between home and issuing countries also play a part, as do foreign exchange considerations. In the good ol' days before ol' devil globalization came along, they had little choice but to issue bonds in their home countries. However, the arrival of Eurobonds in the sixties heralded the arrival of more debt instruments not denominated in the home currency of the issuer. Since then, the Eurobond market has given birth to a plethora of variants which differ according to (a) the nationality of the issuer; (b) the currency of the bond; (c) the place of issuance; and even (d) the place of settlement. It gets pretty complicated pretty fast.

Given Japan's huge pool of savings and the low interest rates on yen-denominated instruments, it is of little surprise that many Eurobond variants have something to do with the land of the rising sun. Unless you are a bond trader, the differences among the various Japan-related bonds are difficult to spot--getting 6 or more right would be quite an achievement. The others are pretty obvious; see if you can match the ff:

(1) A bond denominated in U.S. dollars and is publicly issued in the United States by foreign banks and corporations.
(2) A Eurobond that is issued by a Japanese issuer and does not count against a Japanese institution's limits on the holdings of foreign securities.
(3) A yen-denominated bond issued in Japan aimed at a domestic investor, but settled in Europe.
(4) A type of foreign bond that is issued in the Australian market by non- Australian firms and is denominated in Australian currency .
(5) A Canadian dollar denominated bond that is sold in Canada by foreign financial institutions and companies.
(6) A yen-denominated bond issued in Tokyo by a non-Japanese company and subject to Japanese regulations
(7) A sterling denominated bond that is issued in London by a company that is not British.
(8) A type of foreign-currency denominated bond that is issued in Japan by foreign entities.

a. Samurai Bond
b. Shogun Bond
c. Sushi Bond
d. Daimyo Bond
e. Yankee Bond
f. Maple Bond
g. Bulldog Bond
h. Matilda Bond

UPDATE: Now there are also dim sum bonds which are Chinese RMB-denominated bonds issued in Hong Kong.

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