Euro-denominated fixed coupon bonds

Although the introduction of the euro has helped to homogenise the characteristics and maturities of the bonds issued, there are still some differences between these countries supplied assets. Euro-denominated fixed coupon bonds bear the brunt of these countries issuance, but there are also some other types of bonds being issued by these countries. 

For purposes of analysis, this IDN can be regarded as a fixed-coupon bond plus the double indexation of an interest rate differential. Indexation here refers to a reference rate based on an index. The double indexation creates two long positions in a 5-year dollar-denominated fixed-rate note and two short positions in a euro-denominated fixed-rate note. The short positions remove the euro exchange-rate risk, so investors are exposed only to the euro interest rate risk, which is the desired exposure. 

The cash flows of a fixed-income security can be denominated in any currency. For bonds issued by countries within the European Union, the issuer typically makes both coupon payments and maturity value payments in euros. However, there is nothing that prohibits the issuer from making payments in other currencies. The bond s indenture can specify that the issuer may make payments in some other specified currency. There are some issues whose coupon payments are in one currency and whose maturity value is in another currency. An issue with this feature is called a dual-currency issue. 

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See also in sourсe #XX -- [ ]

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