The next thing to be aware of is the currency the bond is issued in relative to where the bond’s issuer is domiciled. There are three key distinctions:

Domestic bonds

Domestic bonds are bonds issued in the same currency as the currency of the place where the bond issuer is domiciled and regulated. So, a company registered in Switzerland which issues bonds in Swiss Francs is issuing a ‘domestic bond’.

What this means in practical terms for an investor – and for the issuer – is that the whole process – from issuing to redemption – is regulated by the domestic regulatory authorities.

Many domestic markets are also open to foreign borrowers who, although domiciled outside the country, can issue bonds in the domestic currency for sale to local investors as long as they comply with the same local regulations as their domestic counterparts.

So, a Japanese company which issues a bond denominated in sterling for sale to UK investors is issuing a foreign bond.

Foreign bonds have colourful names indicating the domestic market in which they are issued. For example: a bond issued in sterling by an issuer domiciled outside the UK is called a Bulldog; a bond issued in Yen by an issuer domiciled outside Japan is called a Samurai; and a bond issued in US dollars by an issuer domiciled outstide the US is called a Yankee.

Distinct from domestic bonds and foreign bonds, international bonds fall outside the regulatory jurisdiction of any one country.

Their key features are:

• they can be issued in any major currency               
• they are issued outside the country in whose currency they are denominated               
• they can be bought by investors in any country               
• they can be issued at any time to take advantage of market conditions               
• they can be structured in any way to satisfy the special requirements of investors or issuers               
• they are unregistered (or bearer) securities so offering anonymity to the investor