How to Compare the Eurobond to U.S. Government Bonds
U.S. government, or Treasury, bonds are considered the safest bonds in the world. Investors usually turn to them in times of uncertainty. Eurobonds, conversely, are issued all over the world but always in foreign currency. They are a lot riskier but may bring higher interest rates and pay those rates without any tax deductions.
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Eurobonds
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Bonds issued in any foreign currency are called, rather misleadingly, Eurobonds. A bond issued in Swiss francs in Italy by an Italian company or one issued in U.S. dollars in Japan by an Australian company would be considered a Eurobond. These bonds are usually issued by large multinational companies in large denominations of $50 million or more, aimed at institutional investors.
Treasury Bonds
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Bonds issued by the U.S. government are known as Treasury bonds. Strictly speaking, they are divided into bills, notes and bonds, depending on the maturity date. Their minimum denomination is $1,000, and they are much more attractive to small investors.
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Eurobond vs. Treasury Bond
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Because they are issued by large and reputable companies, Eurobonds are considered safe, but not as safe as Treasury bonds. Investors wishing to buy Eurobonds should do some research on the issuing company, which is not necessary with Treasury bonds. Also, Eurobonds are prone to "event risks" when because of unforeseen events a company's credit rating may go down, pushing down the value of the Eurobond too. Because Eurobonds are issued in a foreign currency, investors must accept the risk of currency fluctuations when interest and principal are paid. Conversely, Eurobonds pay interest without any tax deductions, which is not the case with Treasury bonds.
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