Investor yield and gross underwriting spread comparisons among U.S. dollar domestic, Yankee, Eurodollar, and global bonds

Abstract

The characteristics and features of domestic, foreign, Eurobonds, and global bonds differ from one another, as do their regulation. We develop regression models to compare investor yield differences that should logically exist at issuance for these bond market segments for U.S. dollar denominated bonds. Our empirical results show that, ceteris paribus, both privately placed and Rule 144A Eurodollar issues yield more than publicly placed bonds; Yankee bonds yield insignificantly more than domestic bonds; and, the bearer feature common to Eurodollar bonds is not prized enough by institutional investors for them to accept a lower yield relative to domestic or Yankee bonds. We do not find a statistically significant difference between the investor yield spread on U.S. dollar global bonds and U.S. domestic bonds, or Yankee bonds, or Eurodollar bonds. We also study underwriting costs of publicly traded bonds and find, ceteris paribus, that Eurodollar bonds are far more costly for the firm to issue than domestic bonds, Yankee bonds, or global bonds; domestic and Yankee bonds are more expensive than global bonds; and, there is no significant cost difference between domestic and Yankee bonds.