Currency denomination and borrowing cost: Evidence from global bonds

Bo Han

Journal of Multinational Financial Management, 2022, vol. 66, issue C

Abstract: Global bonds are debt securities placed in multiple markets with globally connected trading and clearing mechanisms. This paper studies the relation between global bond issuers’ currency denomination decisions and prevailing borrowing costs. The results show that issuers of these globally fungible debt instruments make currency denomination decisions that are inconsistent with a belief in either covered or uncovered interest parity. Supranational institutions and borrowers from advanced economies exhibit a stronger tendency to engage in this type of opportunistic behavior than emerging economy borrowers. Furthermore, global bond borrowers respond more strongly to deviations from covered interest parity after the 2008 global financial crisis.

Keywords: Global bond; Interest parity; International borrowing; Opportunistic behavior (search for similar items in EconPapers)
JEL-codes: F31 F34 G14 G15 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mulfin:v:66:y:2022:i:c:s1042444x22000329

DOI: 10.1016/j.mulfin.2022.100761

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