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Currency denomination and borrowing cost: Evidence from global bonds

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  • Han, Bo

Abstract

Global bonds are debt securities placed in multiple markets with globally connected trading and clearing mechanisms. This paper studies the relation between global bond issuers’ currency denomination decisions and prevailing borrowing costs. The results show that issuers of these globally fungible debt instruments make currency denomination decisions that are inconsistent with a belief in either covered or uncovered interest parity. Supranational institutions and borrowers from advanced economies exhibit a stronger tendency to engage in this type of opportunistic behavior than emerging economy borrowers. Furthermore, global bond borrowers respond more strongly to deviations from covered interest parity after the 2008 global financial crisis.

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  • Han, Bo, 2022. "Currency denomination and borrowing cost: Evidence from global bonds," Journal of Multinational Financial Management, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:mulfin:v:66:y:2022:i:c:s1042444x22000329
    DOI: 10.1016/j.mulfin.2022.100761
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    More about this item

    Keywords

    Global bond; Interest parity; International borrowing; Opportunistic behavior;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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