Characteristics of Dual currency bonds market instrument
State the characteristics of the Dual currency bonds market instrument.
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Dual currency bond is the straight fixed-rate bond that is issued in one currency and pays coupon interest in that particular same currency. At the time of the maturity, principal is repaid in the second currency. Coupon interest is recurrently at a higher rate as compared to the comparable straight fixed-rate bonds. Amount of dollar principal repayment at the maturity is set at the inception; consequently, the amount permits for some appreciation in exchange rate of the stronger currency. As per the perspective of investor, a dual currency bond involves a long-term forward contract.
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