What Are Eurobonds?

You’ve likely heard the term eurobonds in market analysis or financial news. What are they — and how do they work? Fortrader experts explain eurobonds in simple terms.

What Are Eurobonds?

Rosneft’s dollar-denominated bonds are eurobonds. For Apple, bonds denominated in Chinese yuan would be eurobonds.

The “euro” prefix comes from Italy, where the first eurobond was issued in 1963. Today the instrument is global — the label survives only by convention.

How Do Eurobonds Work?

An issuer — government or company — issues eurobonds to raise capital for projects, expansion, or liquidity needs.

Investors buy them, lending money to the issuer. In return, they receive fixed interest payments — usually once or twice per year.

The issuer pays interest at a pre-agreed rate. At maturity, it repays the full face value.

Like all debt instruments, eurobonds have standard parameters:

• Face value — the nominal price at which the bond is issued.
• Coupon payment — the fixed annual interest amount paid per bond.
• Maturity date — the date the issuer repays the face value. Also called the bond’s life.
• Market price — the current trading price on the exchange. It fluctuates with supply and demand and may be above or below face value. The coupon amount remains unchanged regardless of market price.
• Current yield — annual income expressed as a percentage of the bond’s current market price.
• Yield to maturity (YTM) — the average annual return an investor earns if holding the bond until maturity, including both coupons and capital gain or loss.

Example

A Rosneft eurobond has a face value of $1,000 and a 4.2% annual coupon — $42 per year.

Rosneft is a major Russian oil & gas company, so its bonds attract strong demand. As demand rises, the market price increases — but the coupon stays fixed at $42/year.

If the market price rises while the coupon stays constant, the percentage yield falls. Buying the bond at $1,200 yields $42 annually — a 3.5% current yield (vs. the original 4.2%).

If maturity were one year, the investor would receive $42 (coupon) + $1,000 (face value) = $1,042. At a $1,200 purchase price, that results in a $158 loss: $1,200 − $1,042.

But with a 10-year maturity, total return would be: $1,000 (face value) + $420 (10 × $42) − $1,200 (purchase price) = $220 profit.

Where to Find Eurobond Information

All eurobonds traded on the Moscow Exchange are listed on its official website in the “Equity Market – Instruments – Bonds” section.

Each bond displays all key parameters — allowing investors to compare and select suitable options.

How to Earn Returns from Eurobonds

There are two ways to profit:

• Holding eurobonds — collect regular coupon payments.
• Trading eurobonds — profit from price changes, like any exchange-traded asset.

But most buyers are institutional investors — pension funds, insurance companies, and asset managers — who hold bonds for steady income, not short-term gains. That keeps volatility low and limits speculative opportunities.

Yield depends mainly on the issuer’s creditworthiness. Higher-rated issuers offer lower coupons; riskier ones must pay more to attract investors.

The safest eurobonds are sovereign bonds, backed by governments with strong credit ratings, and bonds from top-tier blue-chip corporations. Their yields are modest — typically 2–3% — but reliability is high. Less creditworthy issuers offer yields of 10% or more — alongside significantly higher risk.

Yield also tends to rise with maturity: longer-dated bonds usually offer higher yields.

How Much Do Eurobonds Cost?

The minimum face value of a single eurobond is $1,000. Many trade in lots — commonly 100 to 200 bonds per lot, equating to $100,000–$200,000 per trade.

To broaden accessibility, the Moscow Exchange allowed fractional lot trading starting in 2015.

Where to Buy Eurobonds

Eurobonds trade on the Moscow Exchange. Retail investors can buy them — but only through a licensed broker.

Three options exist:

• Direct purchase — requires at least $1,000.
• Buying ETF shares tracking eurobonds — these ETFs hold bonds from leading companies (Sberbank, Severstal, Rosneft, Gazprom, etc.).
• Purchasing shares in a mutual fund (PIF) — a domestic alternative to ETFs.

To invest in a PIF, sign a management agreement with a fund manager. For direct eurobond or ETF purchases, open a brokerage account and gain exchange access.

Brokers and fund managers charge fees — not just on purchase, but also for annual custody and management. These costs materially reduce net annual returns.

Summary

Buying eurobonds is among the safest investment options for retail investors without large capital. They deliver stable income and perform well both long-term and during economic uncertainty.

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FAQ

What is the difference between eurobonds and domestic bonds?

Eurobonds are issued in a currency other than the issuer’s home currency; domestic bonds are issued in the issuer’s local currency.

Are eurobonds risky?

Risk depends on the issuer’s creditworthiness. Sovereign and top-tier corporate eurobonds are low-risk; emerging-market or low-rated issuers carry higher default risk.

Can retail investors buy eurobonds on the Moscow Exchange?

Yes — via a licensed broker. Minimum investment starts at $1,000 per bond, and fractional lots are permitted since 2015.