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1、CHAPTER 13Functions of Euromarkets 第一页，共十七页。I.THE EUROCURRENCY MARKETSTHE EUROMARKETS-the most obvious example of the globalization of financial marketsA. The Eurocurrency Market1. Composed of eurobanks who accept/maintain deposits of foreign currency2. Dominant currency: US$第二页，共十七页。THE EUROCURRENC
2、Y MARKETSB.Growth of Eurodollar Marketcaused by restrictive US government policies, especially1.Reserve requirements on deposits2.Special charges and taxes3.Required concessionary loan rates4.Interest rate ceilings5.Rules which restrict bank competition.第三页，共十七页。THE EUROCURRENCY MARKETSC.Eurodollar
3、Creation involves1.A chain of deposits2.Changing control/usage of deposit第四页，共十七页。THE EUROCURRENCY MARKETS3.Eurocurrency loansa.Use London Interbank Offer Rate: LIBOR as basic rateb.Six month rolloversc.Risk indicator: size of margin between cost and rate charged.第五页，共十七页。THE EUROCURRENCY MARKETS4.M
4、ulticurrency Clausesa. Clause gives borrower option to switch currency of loan at rollover.b. Reduces exchange rate risk第六页，共十七页。THE EUROCURRENCY MARKETS5.Domestic vs. Eurocurrency Marketsa. Closely linked rates by arbitrageb. Euro rates: tend to lower lending, higher deposit第七页，共十七页。II. EUROBONDSA.
5、 DEFINITION OF EUROBONDSbonds sold outside the country of currency denomination.1. Recent Substantial Market Growth due to use of swaps.a financial instrument which gives 2 parties the right to exchange streams of income over time. 第八页，共十七页。EUROBONDS2. Links to Domestic Bond Marketsarbitrage has eli
6、minated interestrate differential.3. Placementunderwritten by syndicates of banks第九页，共十七页。EUROBONDS4. Currency Denominationa. Most often US$b. “Cocktails” allow a basket of currencies5. Eurobond Secondary Market -result of rising investor demand6. Retirementa. sinking fund usuallyb. some carry call
7、provisions.第十页，共十七页。EUROBONDS7. Ratingsa. According to relative riskb. Rating Agencies Moodys, Standard & Poor8. Rationale For Market Existencea. Eurobonds avoid governmentregulationb. May fade as market deregulate第十一页，共十七页。EUROBONDSB. Eurobond vs. Eurocurrency Loans1. Five Differencesa. Eurocurrenc
8、y loans use variable ratesb. Loans have shorter maturitiesc. Bonds have greater volumed. Loans have greater flexibilitye. Loans obtained faster第十二页，共十七页。III.NOTE ISSUANCE FACILITIES AND EURONOTESA.Note Issuance Facility (NIF)1. Low-cost substitute for loan2. Allows borrowers to issue own notes3. Pla
9、ced/distributed by banks第十三页，共十七页。NOTE ISSUANCE FACILITIES AND EURONOTESB. NIFs vs. Eurobonds1. Differences:a. Notes draw down credit as neededb. Notes let owners determine timingc. Notes must be held to maturity第十四页，共十七页。IV. EURO-COMMERCIAL PAPERI. SHORT-TERM FINANCINGA.Euronotes and Euro-Commercia
10、l Paper1.Euronotesunsecured short-term debt securities denominated in US$ and issued by corporations and governments.2.Euro-commercial paper(CP)euronotes not bank underwritten第十五页，共十七页。EURO-COMMERCIAL PAPERB.U.S. vs. Euro-CPs1.Average maturity longer (2x)for Euro-CPs2.Secondary market for Euro;not U.S. CPs.3.Smaller fraction of Euro usecredit rating services to rate.第十六页，共十七页。内容(nirng)总结CHAPTER 13。b.Six month rollovers。4.Multicurrency Clauses。1. Differences:。B.U.S. vs. Euro-CPs。for Euro-CPs第十七页，共十七页。