What are the types of Bonds?


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TYPES OF BONDS:
Bonds issued in the international market are of the following types:
1. Domestic Bonds Domestic Bonds can be defined as debt instruments issued by a
borrower in the domestic currency in his home country. Example, an issue of bonds
by Microsoft denominated in USD and sold in the US represents a domestic bond
issue.

2. Foreign Bonds Foreign Bonds can be defined as debt instruments issued by a
borrower in a foreign country and denominated in the currency of that country.
Example, an issue of bonds by Microsoft in UK denominated in GBP would be
classified as Foreign Bonds. Such bonds are subject to regulatory clearance in the
country in which they are issued. They also have to adhere to withholding tax
provisions between the concerned countries. E g: Yankee Bonds: A bond issued by a
foreign entity in the US market and denominated in US Dollars is defined as Yankee
Bond. In general, foreign bonds normally require the regulatory clearances of the
local authority and have nicknames in keeping with the country in which they are
issued.
3. Euro – Currency Bonds / Offshore bonds Euro – Bonds can be defined as bonds
issued by a borrower in a country other than his own country and denominated in a
non-resident currency. Example, an issue of bonds by Microsoft in UK denominated
in CHF would be classified as Euro – Bond issue. Euro-bonds are bearer instruments
which are not subject to withholding tax deductions. The issue is sold to a syndicate
of underwriting banks, who then, place the bonds with investors as per market
demand. The acquisition price of the bonds for the ultimate individual investors is
therefore different from one-another.

 


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