Most of the major financial markets today are reaching out to attract investors from around the globe. These financial markets who reach out to those investors abroad are known as international financial markets. In these markets, foreigners can borrow and lend money to others. Specifically, these international financial markets are made from other sub-markets: the foreign bond market, the foreign bank market, and the foreign equity market. In particular, the scope of this discussion will be solely concentrate on the foreign bond market. As previously mentioned, the foreign bond market is one of the sub-markets that make up the international financial markets. The primitive definition of foreign bond market is “the portion of the domestic bond market that represents issues floated by foreign companies or governments.” In other words, it is the market that bonds trade in a given country that were issued by a foreign government or business. Considering that the most important international financial centers are in London, Tokyo and New York, it is no surprise that the United States is one of two countries that contains the most important foreign bond market. Ironically, the other country is Switzerland, not Japan or Britain. The foreign bonds that “float” (that is, being traded and moving around within this market) are dealt in the domestic currency and is regulated by domestic regulators. For example, if Japan issues bonds to be traded in the U.S. market, the bonds issued by Japan would be subjected to U.S. regulations and officials; it would be the same way for U.S. bonds in Japan’s market. Furthermore, there are special terms for these bonds that float in the foreign bond market. Two well-known bonds are: Yankee bonds and Samurai bonds. Yankee bonds are the Dollar-denominated foreign bonds sold in the United States. Samurai bonds are Yen denominated bonds sold in Japan by a non-Japanese borrower. In addition to the Yen denominated bonds, Japan also has Shogun bonds, which are foreign currency bonds issued within Japan by Japanese corporations. As such, you can see again that all these bonds being traded are in the denomination of the country which it is being traded in. In addition to Yankee and Samurai bonds, there has been a growing popularity for global bonds. Global bonds are usually denominated in dollars, which means it is registered in several national jurisdictions and appealed to investors around the globe. When foreign bonds are issued, they come in three options: fixed-rate issues, floating-rate issues, and equity-related issues. Fixed-rate issues are issued with a fixed coupon, set maturity date, and full repayment of the principal amount at maturity. Floating-rate issues have variable coupons that change at fixed intervals (usually 3 to 6 months). Lastly, Equity-related bonds are a hybrid of underlying bond and common stock, which means that these bonds have fixed rates that can be convertible into a given number of shared before maturity. Also, equity-related bonds allow the holder the right to buy a specified number of shares like common stock at a specific time and price. In summary, the foreign bond market is crucial to the subsistence of international financial markets. The underlying characteristics of the foreign bond market are that the bonds issued by a foreign company that is traded in the domestic market is subjected to being denominated in the local currency and to abide by local laws. References The Financial Dictionary. (2009, January 3). Foreign Bond Market. Retrieved May 7, 2003, from http://www.investopedia.com/articles/basics/03/080103.asp Shapiro,A. & Sarin, A. V.(2009). [Review of the book Foundations of Multinational Financial Management]. International Financing and National Capital Markets. 357 – 359.