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Yankee Bonds

Moneyzine Editor
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Moneyzine Editor
1 mins
September 21st, 2023
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Definition

The term yankee bond refers to an indenture issued in the United States, in U.S. dollars, by a foreign bank or corporation. Yankee bonds are issued when a foreign corporation wishes to raise capital from investors located in the United States.

Explanation

Foreign corporations that wish to raise funds in the United States have the option of issuing what are known as yankee bonds. This is typically done when the interest rates in the U.S. are low relative to the foreign corporation's domestic interest rates. Issuing a yankee bond lowers the foreign corporation's interest expense. These securities are attractive to investors wishing to geographically diversify their portfolios.

Regulations in the United States require these bonds to be registered with the Securities and Exchange Commission (SEC) before they can be sold to the public. These securities are issued in the United States in United States dollars (USD). Issuing the security in USD protects the issuer from fluctuations in currency exchange rates. Credit rating agencies (such as Moody's, Standard and Poor's and Fitch Ratings) will also evaluate the creditworthiness of the security.

Related Terms

kangaroo bond, speculative-grade bonds, payment-in-kind bonds, Eurodollar bond

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