Bearer bonds and Registered bonds o Bearer Bonds are bonds with no registered owner As such they offer anonymity but they also offer the same risk of loss as currency Registered Bonds: the owners name is registered with the issuer e U.S. security laws require Yankee bonds sold to U.S. citizens to be registered Irwin/McGraw-Hill (# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights
Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Bearer Bonds and Registered Bonds ⚫ Bearer Bonds are bonds with no registered owner. As such they offer anonymity but they also offer the same risk of loss as currency. ⚫ Registered Bonds: the owners name is registered with the issuer. ⚫ U.S. security laws require Yankee bonds sold to U.S. citizens to be registered
National Security registrations o Yankee bonds must meet the requirements of the SEC, just like U.s. domestic bonds Many borrowers find this level of regulation burdensome and prefer to raise u.s. dollars in the Eurobond market o Eurobonds sold in the primary market in the United states may not be sold to U.S. citizens o Of course au.s. citizen could buy a eurobond on the secondary market Irwin/McGraw-Hill7-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights
Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. National Security Registrations ⚫ Yankee bonds must meet the requirements of the SEC, just like U.S. domestic bonds. ⚫ Many borrowers find this level of regulation burdensome and prefer to raise U.S. dollars in the Eurobond market. ⚫ Eurobonds sold in the primary market in the United States may not be sold to U.S. citizens. ⚫ Of course, a U.S. citizen could buy a Eurobond on the secondary market
Withholding Taxes o Prior to 1984. the United States required a 30 percent withholding tax on interest paid to nonresidents who held U.S. government or U.S corporate bonds The repeal of this tax led to a substantial shift in the relative yields on U.S. government and El uroaolar bonds This lends credence to the notion that market participants react to tax code changes Irwin/McGraw-Hill7-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights
Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Withholding Taxes ⚫ Prior to 1984, the United States required a 30 percent withholding tax on interest paid to nonresidents who held U.S. government or U.S. corporate bonds. ⚫ The repeal of this tax led to a substantial shift in the relative yields on U.S. government and Eurodollar bonds. ⚫ This lends credence to the notion that market participants react to tax code changes
Recent regulatory Changes Shelf registration(SEC Rule 415) Allows the issuer to preregister a securities issue, and then offer the securities when the financing is actually neede d. ● SEC Rule144A Allows qualified institutional investors to trade private placements These issues do not have to meet the strict information disclosure requirements of publicly traded issues Irwin/McGraw-Hill7-<# Copyright o 2001 by The McGraw-Hill Commpanies, Inc. All rights
Irwin/McGraw-Hill Copyright © 2001 by The McGraw-Hill Companies, Inc. All rights reserved. Recent Regulatory Changes ⚫ Shelf Registration (SEC Rule 415) ◼ Allows the issuer to preregister a securities issue, and then offer the securities when the financing is actually needed. ⚫ SEC Rule 144A ◼ Allows qualified institutional investors to trade private placements. ◼ These issues do not have to meet the strict information disclosure requirements of publicly traded issues