Eurobond

There are three countries involved in eurobonds: the lending country, the currency of the bond, and the borrowing country (not that these are lent by countries, just that these bonds are coming from and going to companies in those countries).

To be a eurobond, a bond must study abroad for at least one semester during college. Er...okay. Rather, it must have a currency that’s different from the lending country, or a currency that’s different from the borrowing country. Basically, eurobonds are bonds that are being tossed around like a beach ball by lenders and borrowers in countries with other currencies.

For instance, a Japanese company could lend a loan in British pounds to a U.S. borrower. Why bother? Well, because it helps multinational companies keep the capital flowing abroad. Plus, it’s common for international companies to choose loan currencies based on that country’s regulatory laws. The more business-friendly, the better. For borrowers, eurobonds are great for their liquidity, but are risky because of how currency rates can change among themselves.