Why Are More Sovereigns Issuing in Euros? : Choosing between USD and EUR-Denominated Bonds

Velandia, Antonio ; Cabral, Rodrigo

World Bank, Washington, DC

关键词: BONDS;    DEBT STRATEGY;    CURRENCY RISK;    SOVEREIGN BONDS;    MONETARY POLICY;   

DOI  :  10.1596/1813-9450-8324
RP-ID  :  WPS8324

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper presents and discusses thearguments offered by several sovereigns that have joined atrend starting in 2013 whereby sovereign and corporateissuers, especially in Latin America, have graduallyreplaced a portion of the funding raised in U.S. dollarswith euros. The trend seems to respond to the divergentmonetary policies followed by the U.S. Federal Reserve Boardand the European Central Bank. The selected country casesstate strategic and tactical arguments for increasing theirissuance in euros. The strategic reasons relate to internalcurrency benchmarks and their rationale. In some cases, suchsubstitution is supported by the argument that furtherdiversification in the investor base was needed. Thisargument was reinforced by the relatively tight conditionsin the U.S. dollar market. Tactical arguments refer to theneed to open the market to the private sector and raisefunding in euros, or the need to access new investors as apreliminary step to attract them to the domestic market.Several countries also admit that the optical effect oflower coupons was a relevant consideration. This paperhighlights that it is important that sovereigns avoid makingdecisions by comparing nominal coupons in both currencies.More important, a formal debt management strategy, includinga target for the currency composition, should guide debtmanagers. Without a strategy, the debt manager cannot tellhow the issuance in a particular currency affects theexposure of the debt portfolio to foreign currency risk andhelps or not in achieving the debt management objectives.