Global Bond Market

Global bonds are bonds offered within several different markets at the same time. A bond is essentially a loan by an investor, to a company or to the government, in exchange for a preferred interest rate. The investors vary; they can be corporate or individuals. Investors will earn interest based on the company's or government's income.

Global bonds are usually issued by large, international corporations with high credit ratings. They are issued internationally, in different currencies, and interest is paid in the currency of the country where it is issued. Bonds are issued for a specific amount of time like, for example, a two-year $20,000 U.S. government global bond will be paid back by the government within two years at face value plus the interest rate.

Global bonds are useful to businesses because bonds give companies the capital to expand, or meet financial debt, at a lower cost than borrowing from a bank. Global bonds are one of the safest methods of international investing. Political and currency risks are minimized with a global government bond when they are registered with the Securities and Exchange Commission (SEC), because the bond issuers must meet certain criteria before issuing the bonds. Also, an added line of security is that credit ratings are assigned to global bonds through research by S&P and Moody's Investor Service.

The global bond market is divided into two areas: the internal bond market and the external bond market. The internal bond market (national bond market) can be further divided into the domestic bond market and the foreign bond market. The domestic bond market is the trading of bonds in the country where the bond is issued. The foreign bond market describes what becomes of national global bonds in countries outside of the nation that issues them.

The external bond market (international bond market) offers the bonds to investors in different countries. The difference from the foreign bond market is that bonds are issued outside the jurisdiction of one country. It can also be called the offshore bond market or Eurobond market because it started in Europe, this market oversees the exchange of global bonds across national borders.