The Units of Account in Eurobonds

Abstract

Since 1957 and at an accelerated pace since 1963, an international capital market for bonds, called the Eurobond market or Euro-issue market, has been developing in Western Europe and the United States. It is a market for bearer bonds issued by international organisations, large industrial concerns or their subsidiary finance corporations, States, state enterprises and local authorities. They are placed with an international clientele: wealthy private persons (oil sheiks among others), banks and institutional investors. The distribution is entrusted to issuing syndicates in which bankers from London, Luxembourg, Frankfurt and Amsterdam, and securities brokers from New York co-operate. The European capital market is a parallel market in addition to the domestic market, and should be distinguished from the traditional international markets of, for instance, London, New York and Zurich. Direct state influence is but little. The bonds are usually expressed in U.S. dollars, D-Marks or units of account, or they may have an option of currency. International loans may also be expressed in Dutch guilders, or in French or Belgian francs. The bonds are often issued by subsidiary finance corporations in Luxembourg, in the Netherlands, in the American state of Delaware or in the Netherlands Antilles, where no withholding taxes are levied on the interest payments. The absence of coupon tax has stimulated the development of the Eurobond market.