The Yankee Bond Market allows US investors to participate in deals with foreign entities. The Securities Act of 1933 sets standards for foreign corporations to issue bonds in the US, and debt rating agencies assess their creditworthiness. The market may not be accessible to small investors, but offers opportunities for large ones.
The US bond market presents an excellent opportunity for investors in the United States to participate in market deals involving corporations, banks, and governments that are not based in the country. Using the traditional moniker for Americans, the Yankee Bond Market trades dollar-denominated bonds issued in the United States by foreign entities that meet standards set by the Securities and Exchange Commission.
The basic rules that help govern the issuance of Yankee bonds by foreign corporations are found in the Securities Act of 1933. Essentially, the law sets out the standards that foreign corporations must meet before a bond issue can take place. In addition to complying with the regulations outlined in the Securities Law, the bonds must also be registered with the Securities and Exchange Commission. Because the process is so comprehensive, it is not unusual for a new bond issue to take more than three months to complete and be offered to those traded on the Yankee bond market, and therefore accessible to investors.
An important aspect of preparing to trade in the US bond market is determining that the foreign entity is creditworthy to issue bonds within the United States. This is often accomplished by using debt rating agencies to assess the financial condition of the entity and determine the stability of the bond offering. Foreign corporations and governments are generally willing to undergo this comprehensive evaluation because the ability to issue bonds in the United States may allow the entity to take advantage of periods when interest rates are low and the entity can enjoy payments at a lower rate. lower interest rate.
While the US bond market offers a significant investment opportunity, the market is not the best for all types of investors. In many cases, the bonds are issued in tranches, with an individual offering exceeding US$1 billion. This may put the bonds on the Yankee bond market out of reach for many small investors, but the offering still offers an excellent opportunity for large investors, such as US-based companies, the chance to make substantial profits. when trading in the Yankee bond market.
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