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A Eurobond is an international bond-market instrument, and its name does not require it to be denominated in euros. A local-currency bond is defined by the currency in which the issuer owes principal and interest—usually the issuer’s domestic currency. These are different dimensions: one describes the relationship between the issuer and the market of issuance, while the other describes the payment currency. A bond can therefore be international and local-currency denominated, or be issued in a domestic market in a foreign currency.
The two questions that identify any bond
Confusion starts when “Eurobond” is treated as a currency label. To classify an issue accurately, ask two separate questions.
1. Where is the bond issued and targeted?
Market classification concerns the relationship between the borrower’s country of residence and the market in which the securities are issued or offered. In its debt-securities statistics, the Bank for International Settlements (BIS) distinguishes domestic from international issuance by whether the security is issued inside or outside the borrower’s local market. Its methodology can also consider the issue’s targeting and other security characteristics.
The BIS domestic-market test looks at details such as where the security is registered, which law governs it and where it is listed, compared with the immediate issuer’s residence. Those tests are statistical conventions rather than a universal legal definition that overrides an offering document.
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2. What currency fixes the payment obligation?
Denomination is a contractual term. It determines the currency in which coupons, principal and any other promised payments are owed. The word “Eurobond” does not establish that currency. A bond called a Eurobond may be denominated in U.S. dollars, euros, pounds, yen or another currency, depending on its terms.
What is a Eurobond?
The World Bank’s 2019 Issuing International Bonds: A Guidance Note uses “Eurobond” broadly for international commercial bond financing. Under that usage, the name describes an international market format, not a euro-denomination requirement. The guidance notes that bonds can be denominated in any currency.
In conventional usage, a Eurobond is often described as a bond listed, traded and settled in the European or “Eurobond” market. That description is not a single, universally binding legal test. The World Bank notes grey areas and different formats, while BIS statistics include instruments conventionally known as Eurobonds alongside other international debt securities.
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Consequently, the exact meaning must be checked against the issue’s prospectus, listing venue, settlement arrangements, governing law and distribution plan. Two transactions marketed with the same label can have different legal, tax and settlement features.
What is a local-currency bond?
A local-currency bond is denominated in the issuer’s domestic currency. A government whose revenues and tax receipts are mainly in its own currency, for example, may issue debt whose coupons and principal are payable in that currency. The denomination tells you the payment currency; it does not, by itself, tell you whether the bond is sold domestically or internationally.
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A local-currency issue can be offered outside the issuer’s home market and still be classified as international under a market-based framework. Conversely, a bond sold in the issuer’s domestic market can be denominated in a foreign currency if local rules permit it. “Local currency” and “international” should therefore never be used as opposites.
Eurobond versus local-currency bond: the practical comparison
| Attribute | Eurobond | Local-currency bond |
|---|---|---|
| What the label primarily describes | An international-market issuance format or convention | The currency in which principal and interest are payable |
| Required denomination | None; it may be any currency | The issuer’s domestic currency |
| Where it may be issued | Outside the issuer’s local market, subject to the transaction’s structure | Often the home market, but it can also be issued internationally |
| Investor base | Typically cross-border investors targeted through an international distribution | Often domestic investors, though an international distribution is possible |
| Currency exposure for the issuer | Depends entirely on the chosen denomination and the issuer’s revenues | Usually better aligned with domestic revenues, but alignment is not guaranteed |
| Legal, tax and settlement regime | Issue-specific; no single Eurobond rulebook applies to every transaction | Issue-specific and dependent on the market, currency and applicable jurisdictions |
How foreign bonds and global bonds fit in
Foreign bonds
In BIS terminology, a foreign issue is generally a bond issued by a nonresident borrower in the local currency of the market where it is sold and registered for that market. The familiar names reflect the host market: a Yankee bond is a foreign issue in the U.S. dollar market, a Samurai bond is issued in Japan’s yen market, and a Panda bond is issued in China’s renminbi market.
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A foreign bond is therefore identified by both a foreign borrower and the local currency and market of issuance. It is not simply another name for every Eurobond, and it does not imply that the borrower’s own currency is being used.
Global bonds
The World Bank describes a global bond as a bond issued simultaneously in the Eurobond market and in at least one domestic bond market. “Global” refers to the placement format and investor access. It does not specify whether the debt is denominated in euros, dollars or another currency.
| Term | Main identifying feature | What it does not tell you |
|---|---|---|
| Eurobond | International-market format or convention | The denomination currency or a universal legal regime |
| Local-currency bond | Denominated in the issuer’s domestic currency | Whether it is domestic or international in market classification |
| Foreign bond | Foreign borrower issuing in the host market’s local currency | That the borrower is using its own currency |
| Global bond | Simultaneous placement in the Eurobond market and at least one domestic market | The denomination currency |
Why denomination matters: exchange-rate risk
Suppose a company earns most of its revenue in its home currency but issues unhedged debt in a foreign currency. If the home currency depreciates, each unit of foreign-currency principal and interest costs more when translated into the home currency. The issuer’s debt burden can rise even when the foreign-currency amount owed has not changed.
For example, an issuer owing 100 million units of a foreign currency would owe the same 100 million units after a 20% depreciation of its domestic currency. However, the domestic-currency value of that obligation would be approximately 20% higher if the exchange rate moved proportionally and no hedge offset the change. This is an illustration of the mechanism, not a forecast of any particular market move.
Borrowing in the issuer’s own currency shifts exchange-rate exposure toward investors: the issuer continues to owe domestic-currency amounts, while an overseas investor’s return changes when converted into the investor’s currency. That shift does not remove other risks. Local-currency debt can still face default, inflation, interest-rate, liquidity and market-value risk.
Hedging changes the exposure, not the label
An issuer may use forwards, swaps or other arrangements to hedge foreign-currency payments, or may have foreign-currency revenues that naturally offset its debt. The bond remains denominated in the currency stated in its terms. Hedging can introduce collateral, counterparty, rollover and basis risks, so the denomination and the hedge should be examined separately.
Local- and foreign-currency sovereign risk
Currency can affect how investors assess a sovereign’s credit risk. A government that controls the currency in which its local-currency debt is payable may have different policy and repayment options from one facing obligations in a foreign currency. The BIS Working Paper 709, published on 23 March 2018, examined differences between local- and foreign-currency sovereign credit-risk assessments and reported that the measured gap had diminished over the preceding two decades.
That finding is an observation about aggregate sovereign-risk assessments, not a guarantee for a specific country or bond. A sovereign can still default on local-currency debt, and inflation or currency depreciation can reduce the real value of payments to investors.
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Repair Windows errors before they cause bigger problemsFix Now →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →How BIS statistics classify international debt securities
BIS international debt-securities statistics include instruments conventionally called Eurobonds and foreign bonds. The classification is based on the relationship between the immediate issuer’s residence and the market in which the security is issued, rather than on denomination alone.
The BIS has refined and discussed these concepts over time. Its June 2021 note, What constitutes an international debt security in BIS statistics?, explains the limits and evolution of statistical classification. The September 2025 overview, International finance through the lens of BIS statistics: bond markets, domestic and international, provides current context for international issuance and currency risk. Aggregate statistics should not be read as proof that every security using a particular market label has identical documentation or risk.
A decision framework for comparing an international bond with a domestic issue
When comparing a Eurobond-style transaction with a local-currency domestic bond, work through the following questions in order.
- Identify the payment currency. Read the denomination, coupon and principal clauses. Confirm whether payments are fixed in the issuer’s currency, a foreign currency or a currency basket.
- Map the issuer’s cash flows. List the currencies of operating revenue, taxes, assets and existing debt. A nominally cheaper foreign-currency coupon can become expensive after an adverse exchange-rate move.
- Determine the market of issuance. Check the offering and distribution language, registration location, listing venue and whether the issue is targeted outside the issuer’s home market.
- Identify the investor base. International placement may broaden access to investors but can add disclosure, documentation, settlement and compliance requirements in several jurisdictions.
- Check the governing documents. Review governing law, covenants, events of default, paying-agent arrangements, clearing systems, tax treatment and any listing obligations. These terms are transaction-specific, not automatic consequences of the word “Eurobond.”
- Separate currency and credit analysis. Model exchange-rate exposure independently from the issuer’s ability to pay, and examine interest-rate, liquidity, inflation and market-value risks.
Common misconceptions
“Every Eurobond is denominated in euros.”
False. The World Bank’s 2019 guidance expressly uses Eurobond for international bonds that may be denominated in any currency.
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False. Local currency describes denomination. The issue can still be marketed or issued outside the borrower’s local market and classified as international.
“A foreign bond is simply a Eurobond in another name.”
False. A foreign bond is generally a nonresident borrower’s issue in the host market’s local currency, such as a Yankee, Samurai or Panda bond.
“Issuing in local currency eliminates risk.”
False. It can reduce a mismatch between domestic revenues and debt service, but default, inflation, interest-rate, liquidity and market risks remain.
“The label determines the legal terms.”
False. Documentation, governing law, tax treatment, settlement and investor eligibility depend on the particular transaction and jurisdictions involved.
What to verify in an actual offering
For a specific security, the offering memorandum and final terms are more reliable than the market label. Verify the currency of each payment, the issuer’s legal entity and residence, where and to whom the bonds are offered, registration and listing details, governing law, clearing and settlement systems, withholding-tax provisions, covenants, redemption terms and any currency hedge described by the issuer.
Definitions also vary between market practice, legal documents and statistical datasets. The BIS classification is useful for understanding international versus domestic issuance, while the World Bank’s terminology explains common financing practice. Neither substitutes for reading the terms of the bond being considered.
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