The Eurocurrency and Eurobond Markets

Abstract

In this chapter we take a detailed look at two important markets that exert a great deal of influence on the international financial system, the Eurocurrency market and the Eurobond market. Eurocurrency markets are defined as banking markets which involve short-term borrowing and lending conducted outside of the legal jurisdiction of the authorities of the currency that is used; for example Eurodollar deposits are dollar deposits held in London and Paris. The Eurocurrency market has two sides to it; the receipt of deposits and the loaning out of those deposits. By far the most important Eurocurrency is the Eurodollar which currently accounts for approximately 65–70 per cent of all Eurocurrency activity, followed by the Euromark, Eurofrancs (Swiss), Eurosterling and Euroyen. The use of the prefix Euro is somewhat misleading because dollar deposits held by banks in Hong Kong or Tokyo are equally outside the legal jurisdiction of the US authorities and also constitute Eurodollar deposits. This more widespread geographical base means that Euromarkets are often referred to as ‘offshore’ markets.