Exam 9: International Financial Markets

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The international bond market consists of all bonds sold by issuing companies,governments,or other organizations outside their own countries.Issuing bonds internationally is an increasingly popular way to obtain needed funding.Typical buyers include medium-sized to large banks,pension funds,mutual funds,and governments with excess financial reserves.Large international banks typically manage the sales of new international bond issues for corporate and government clients.
The international equity market consists of all stocks bought and sold outside the issuer's home country.Companies and governments frequently sell shares in the international equity market.Buyers include other companies,banks,mutual funds,pension funds,and individual investors.The stock exchanges that list the greatest number of companies from outside their own borders are Frankfurt,London,and New York.Large international companies frequently list their stocks on several national exchanges simultaneously and sometimes offer new stock issues only outside their country's borders.
All the world's currencies that are banked outside their countries of origin are referred to as Eurocurrency and trade on the Eurocurrency market.Thus U.S.dollars deposited in a bank in Tokyo are called Eurodollars,and British pounds deposited in New York are called Europounds.Japanese yen deposited in Frankfurt are called Euroyen,and so forth.
Because the Eurocurrency market is characterized by very large transactions,only the very largest companies,banks,and governments are typically involved.Deposits originate primarily from four sources:
1.Governments with excess funds generated by a prolonged trade surplus
2.Commercial banks with large deposits of excess currency
3.International companies with large amounts of excess cash
4.Extremely wealthy individuals