What is a Eurobond?
A Eurobond is a bond sold to investors outside the home country of the currency it is issued in. A US dollar bond sold by Pakistan's government to investors in London is one example.
The "Euro" in the name does not mean the euro currency. The term is older than the euro. It comes from dollar bonds that were first sold in Europe, outside the United States.
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Formal definition and edge cases
In precise terms, a Eurobond is a debt security that is:
- denominated in a currency other than that of the country or market where it is issued
- usually underwritten by an international group of banks
- usually governed by foreign law, often English or New York law
- usually held and settled through international clearing systems, not a single domestic exchange (see clearing and settlement and custodian)
Edge cases:
| Case | Is it a Eurobond? |
|---|---|
| A US dollar bond issued in London by a Pakistani issuer | Yes |
| A euro bond issued in Germany by a German company to German investors | No. It is a domestic bond. |
| A dollar bond sold inside the United States by a foreign issuer under US rules | No. It is a "foreign bond", often called a Yankee bond. |
| An international sukuk in US dollars | It has a similar structure but is Shariah-based, not a conventional interest bond (see Islamic finance). |
Worked example (hypothetical)
A country's government earns its tax revenue in its own currency, the rupee. It needs US dollars, so it issues a dollar Eurobond to foreign investors.
- Investors pay dollars at the face value.
- The government pays a fixed coupon in dollars at set dates.
- At maturity, it repays the face value in dollars.
The risk sits with the issuer. If the rupee loses value against the dollar, each dollar coupon costs more rupees to pay. This is currency risk for the issuer. For investors, the main risk is that the issuer cannot pay, which is default.
Eurobond yield and Pakistan Eurobond news
The yield is the return an investor gets if they buy the bond at today's market price and hold it to maturity. Price and yield move in opposite directions:
- Investors worry about repayment → they sell → price falls → yield rises.
- Confidence improves → price rises → yield falls.
When Pakistani news reports that "Pakistan Eurobond yields fell", it usually means international investors see lower risk in the government's dollar debt. Analysts often compare that yield with US Treasury yields. The gap is the credit spread, quoted in basis points.
You will see the term in:
- news on government borrowing and IMF programmes
- credit rating agency reports
- reports on emerging markets debt
- analysis of debt-to-GDP and the external account
Eurobonds trade mainly between banks and institutional investors. Retail trading platforms do not usually list them. Bond-related CFDs, where available, are mostly on government bond futures such as the Bund. Leveraged CFD trading can lose money fast.
Related terms
- Bond duration: how sensitive a bond's price is to changes in interest rates
- Accrued interest: the coupon earned since the last payment date
- Bond auction: how domestic government bonds are usually sold
- Currency depreciation
- Fundamental analysis
- Trading glossary
Frequent questions
Is a Eurobond issued in euros?
Not necessarily. Most Eurobonds are issued in US dollars. "Euro" refers to where the market started, not to the currency.
What is the Pakistan Eurobond?
It is the name the media gives to US dollar bonds that Pakistan's government sells to international investors.
Why does Eurobond yield matter?
It shows how much return investors demand to lend to the issuer. A higher yield means borrowing costs more for the issuer.
How is a Eurobond different from a foreign bond?
A foreign bond is issued in the currency's home market under that market's rules. A Eurobond is issued outside that home market.
Can the issuer lose money on currency moves?
Yes. If the issuer's home currency weakens, the coupons and repayment cost more in local currency.