Lyubimtseva_S_N__Koreneva_V_N_L_93_Kurs_angli

country are issued and traded.

Bonds traded in the US foreign bond market are nicknamed Yankee bonds. In Japan, foreign bonds issued by non-Japanese entities are nicknamed Samurai bonds. Foreign bonds in the United Kingdom are nicknamed bulldog bonds, in the Netherlands – Rembrandt bonds and in Spain – matador bonds.

The external bond market, also called the international bond market, includes bonds with several distinguishing features: 1) they are underwritten by an international syndicate, 2) at issue they are offered simultaneously to investors in a number of countries, 3) they are issued outside the jurisdiction of any single country, and 4) they are in unregistered form. The external bond market is commonly referred to as the offshore bond market, or more popularly, the Eurobond Market. The Eurobond Market is divided into different submarkets depending on the currency in which the issue is denominated.

Computerization in bond markets has reduced costs of trading bonds and made them more convenient to hold and transfer: they are not issued in certificate form – they are only computer entries.

B. DIALOGUE

THE BOND MARKET

Foreigner: Financial markets are generally classified as money or capital markets and primary or secondary markets. Do you follow this classification?

Russian: Yes, we do. But structurally we divide our financial market into a hard-currency market, a bank credit market, debt and equity markets and the market of gold and precious metals.

F.: I see. My experience in Russia tells me that your investors prefer operations in the hard currency market to investing in the real sector of your economy.

R.: Yes, our capital markets are thin, weak and vulnerable.

F.: It's a pity, because the debt market, for one, is a powerful instrument of monetary policy. Many governments issue bonds to solve their financial problems and to cover budget deficits.

R.: And how is the international bond market performing this year?

F.: Volumes of issuance have been rather high, though fewer bonds have appeared from emerging markets of Eastern Europe.

R.: Investors are still viewing borrowers in emerging markets too risky, I suppose. Western sovereign borrowers are the main players in the market, aren't they?

F.: Well, yes, but many are trying to slow down their borrowing and reduce their national debt. R.: This leaves room for other borrowers, right?

F.: Yes, supranational have diversified tremendously, both in their products and markets. Corporate borrowers are also very active.

R.: But after the crisis investors have become more cautious, haven't they?

F.: That's right. Credit ratings of borrowers have become much more important. Investors demand transparency and liquidity. Borrowers are finding it much harder and more expensive to raise sufficient funds on the international debt market.

R.: How has the introduction of the Euro affected the bond market?

F.: Some are thinking of Euro-denominated bond issues as the bond markets are moving away from the dollar in favour of the Euro. The competition is becoming keener.

R.: We are entering a new and turbulent phase in the debt markets. Many people believe that the worst is yet to come.

Notes

1in terms of the instrument maturity – с точки зрения сроков погашения финансового инструмента

2When revenues fall short of expenditures – Когда доходы меньше расходов

3... governments go into debt – правительства осуществляют заимствования

VOCABULARY LIST

A. financial market финансовый рынок bond market рынок облигаций

maturity n срок долгового обязательства back v гарантировать, давать поручительство to serve customers обслуживать заказчиков

money market денежный рынок, рынок краткосрочного капитала capital market рынок долгосрочного ссудного капитала

primary market первичный рынок secondary market вторичный рынок deal (in) v торговать

short-term securities краткосрочные ценные бумаги turn (to) v обращаться (к кому-л.)

debt financing финансирование путем получения займов in return for в обмен на

equity financing мобилизация капитала с помощью выпуска акций share (зд.) доля

ownership n (зд.) владение собственностью

to issue stock (bonds) выпускать акции (облигации) long-term funds долгосрочные средства

issuer n эмитент ценных бумаг debtor n должник, дебитор lender n кредитор

supranational n наднациональная организация municipal government муниципалитет

by far (зд.) в значительной степени uniform adj единый

from the perspective of с точки зрения

internal bond market внутренний рынок облигаций external bond market внешний рынок облигаций decompose v разлагать на составные части domiciled adj постоянно проживающий subsequently adv впоследствии, затем, позже

trade v (зд.) осуществлять сделки на рынке ценных бумаг nickname v давать прозвище

distinguishing feature отличительная черта

underwrite v гарантировать размещение ценных бумаг jurisdiction n юрисдикция

in unregistered form незарегистрированный offshore bond market офшорный рынок облигаций

Eurobond Market рынок еврооблигаций submarket n субрынок

denominate v выражать в валюте различного достоинства readily adv быстро, легко, без труда

in certificate form в форме сертификата computer entry запись в компьютере В. structurally adv структурно

hard-currency market рынок твердой валюты bank credit market рынок банковских кредитов debt market рынок ссудного капитала

equity market рынок акций

market of gold and precious metals рынок золота и драгоценных металлов real sector реальный сектор

thin adj (зд.) узкий issuance n выпуск (акции)

emerging markets молодые, развивающиеся рынки

sovereign borrower суверенный заемщик, государство-заемщик cautions adj осторожный

credit rating кредитный рейтинг

Euro евро (валюта)

turbulent adj бурный, неспокойный

EXERCISES

Ex. 1. Answer these questions:

A.1. What role do financial markets play?

2. In what ways do financial markets differ?

3. How can financial markets be classified?

4. In what ways can capital be raised?

5. What ways of raising capital are available for governments? 6. What is a bond?

7. How can the global bond market be subdivided?

8. In what forms can government bonds be issued?

B.1. What are the components of the Russian financial market? 2. Are volumes of issuance big in the market?

3. Who are the main players in the bond market?

4. What tendencies have been registered in the market lately? 5. How will the introduction of the Euro affect the market? Ex. 2. Give derivaties of:

different adj	serve v	purchase v	participate v
existing adj	satisfy v	need n	important adj
measure n	classification n	trade n	depend v
experience n	dominant adj	reliable adj	doubt n
divide v	refer v
Ex. 3. Find English equivalents for the following Russian phrases from the main text and dialogue:
A. иметь дело с различными финансовыми инструментами; обслуживать клиентов; со сроком
платежа менее (более) одного года; участвовать в сделках на рынке; первичный (вторичный)
финансовый	рынок; обращаться (к); финансирование путем получения займов; мобилизация

капитала с помощью выпуска акций; выпускать облигации; оговоренный срок; эмитент; единая

система классификации; внутренний (внешний) рынок облигаций; эмитент, не проживающий постоянно в стране; облигации, которыми торгуют на рынке; выпуск облигаций гарантирован международным синдикатом; выпускать в незарегистрированной форме; офшорный рынок облигаций; сократить расходы, связанные с куплей и продажей облигаций; выпускать облигации в форме сертификата; выпускать облигации в виде записи в компьютере;

B. объем выпуска облигаций; молодые, развивающиеся рынки; снижать заимствования и сокращать национальный долг; диверсифицировать деятельность; рейтинг кредитоспособности; введение валюты евро; выпуски облигаций в евро; самое трудное еще впереди.

Ex. 4. Say in a few words what the main text is about. Use the opening phrases from Ex. 4 (Unit 1). Ex. 5. Sum up the content of the main dialogue. Use the phrases from Ex. 5 (Unit 1).

Ex. 6. Read the dialogue, translate the Russian remarks into English and act it out.

Russian: С моей точки зрения, мы вступили в очень сложный период развития рынка облигаций. Все более важную роль играют крупные институциональные инвесторы, объемы выпусков облигаций возрастают, конкуренция на рынке обостряется.

Foreigner. Besides, big investors have power to demand more transparency and liquidity of the market. R.: Недавний финансовый кризис на рынках Азии оказал отрицательное воздействие на глобальный рынок ссудного капитала. Инвесторы стали проявлять большую осторожность. Многие корпоративные заемщики испытывают трудности с изысканием необходимых им средств.

F.: Nevertheless the competition in the market is an advantage to borrowers who are trying to extend maturities.

R.:Да, это так. Но инвесторы могут отказаться от инвестирования своих средств в облигации и переместить свой капитал на более привлекательные финансовые рынки.

F.: Of course, the bond market has become a dangerous place for borrowers and investors. However, the importance of our investors for the bond market continues to grow.

R.: Это, безусловно, так. Политическая, экономическая и финансовая стабильность вашей страны позволяет вам успешно конкурировать на этом рынке и оказывать на него большое воздействие. Ex. 7. Work on vocabulary and grammar.

a) Study the key words of the unit in the dictionary at the back of this book:

bond, maturity, debt financing, equity financing, placement, surplus, issue, trading, credit rating, investor, return, securities, liquidity;

b) Think of the verbs that are most commonly used with:

maturity, bond, stock, issue, investor, banks, return, depository, sale, credit rating, placement; c) Think of the nouns that are most often used with:

to raise, to sell, to issue, to borrow, to trade, to divide, to float, to create, to participate, to develop, to attract, to negotiate, to mature, to place, to generate;

d)Make your own sentences with any five word combinations from (b) and (c).

e)Match the verbs from (a) with the nouns from (b) below:

a) to bring together	b) capital
to classify	people
to underwrite	issue
to invest into	debt financing
to speed up	role
to raise	use
to broaden	real sector
to rely on	financial instruments
to enhance	placements
to issue	bonds

Ex. 8. a) Supply the articles where necessary.

b)Write down 3-5 questions about the text.

c)Explain how the Eurobond Market operates. The Eurobond Market

The Eurobond Market is ... major source of corporate financing in ... unregulated international capital market.

This market permits lenders to lend directly to borrowers across ... national borders.

The borrowers or issuers of the bonds include MNCs, public sector organizations, sovereign states and ...

commercial banks. The lenders or purchasers of the bond securities are individual and institutional investors, with ... latter group dominating. Generally, purchasers buy Eurobonds in currencies other than their own and

... major attraction of these bonds for investors is that in most currencies they are anonymous bearer bonds that exempt individuals from capital gains and withholding taxes in their own domestic system.

Banks play a major role in ... Eurobond market by bringing together lenders and borrowers, underwriting the bond issue, selling or placing the bonds, supporting the secondary market in bonds, and managing the repayment of interest and capital to ... investors. The participating banks will receive ... fee for each of these services rendered to the borrower or investor.

The key to the market is ... established and high quality credit rating with an internationally recognised rating agency such as Moody's or Standard and Poor's.

Eurobonds, of whichever currency denomination, are listed in another country and trade independently of any domestic market. In recent years there has been ... continued rapid expansion of Eurobond issuance that has been one of... most significant developments in bond markets worldwide.

In this context, there was one more fast-growing market that deserves ... mention. It is the ECU (European Currency Unit) bond market which proved to be popular a few years ago and paved the way to the single Eurobond market.

Words you may need:

MNC (multinational company) многонациональная компания (корпорация) anonymous adj безымянный, анонимный

Moody's (Investors Service) ведущее агентство по установлению рейтингов ценных бумаг

Standard and Poor's (Corporation) ведущая фирма по установлению рейтингов ценных бумаг list v (зд.) зарегистрировать на бирже

ECU (European Currency Unit) Европейская валютная единица (ЭКЮ)

Ex. 9. a) Supply the prepositions where necessary.

b) Say what you have learnt about the debt market in India.

The door is slowly opening on India's debt markets. Foreign investors can now invest 100% of their Indian portfolios in corporate debt as against the 30% allowed previously. The market itself is booming. ... longterm debt worth Rs55 billion ($1.54 billion) raised by Indian corporates in the past few months and fixedincome returns overtaking those of equities, the market is ripe ... reform.

The driving force ... India's debt market reforms is the need to raise capital ... infrastructure projects. India needs ... about $300 billion ... the next 10 years for infrastructure alone. Only half of this can be raised from the commercial banks, the equity market, the government and multilateral agencies like the World Bank.

The other half must come from its domestic debt markets. But the Indian debt market is too small to meet this requirement at the moment.

So the market is moving ... the right direction and bonds-not shares – are the hottest selling investments in India today. In the past, equity markets overshadowed debt markets ... both size and returns. While India's total stock market capitalization is still equal ... $138.6 billion, analysts say that investors are increasingly choosing bonds ... equity. Of the total Rs 16.74 billion raised from the capital markets in the month of August, 78% or Rs 13 billion was raised in debt floats. Returns ... debt are also higher than from equity.

In spite of the government's efforts, two major obstacles remain. The government bond market is still closed

... investment banks. The other problem is liquidity.

Besides, secondary market trading in debt is limited ... government securities and is done mainly on the wholesale debt market of the National Stock Exchange. Allowing market-making in government securities is the key ... creating an active secondary debt market in India.

Having this in mind the Reserve Bank of India – the Indian central bank-set ... a system of primary dealers or market makers in government securities. But for debt trading to be successful, several structural changes need to be put in place, including setting up a depository and establishing a REPO market.

Words you may need:

corporate debt облигации, выпущенные корпорацией

The market... is booming. На рынке ... наблюдается повышение деловой активности. fixed-income return доход по бумагам с фиксированным доходом

overtake v обгонять

ripe adj (зд.) готовый к чему-л. overshadow v омрачать, затмевать capitalization n капитализация

debt float выпуск долговых обязательств market-making «делание рынка» primary dealer первичный дилер

depository n депозитарий

REPO market рынок РЕПО

Ex. 10. a) Open the brackets putting the verbs in the correct form, b) Explain the essence of public debt management in France. French Government Securities

France (to begin) to modernize the management of its public debt in 1985, and this effort now (to bear) fruit. The market in French government securities is today one of the most liquid in the world, second only to the market in US Treasury debt.

By virtue of its position in the French financial markets, the French Treasury (to initiate) a series of reforms over the past several years designed to open up those markets and make them more attractive, thus increasing the competitiveness of Paris as a financial center.

Today, French government debt issuance policy (to combine) three distinctive features, namely simplicity, liquidity, and transparency.

Simplicity. The structure of French government debt (to undergo) a profound transformation since 1980, and today the French Treasury mainly (to issue) three categories of standardized securities:

Fungible Treasury bonds with maturities of up to thirty years, which are the instruments that the government uses to raise long-term funds.

Fixed-rate Treasury notes paying annual interest with maturities of between two and five years. Finally, fixed-rate short-term discount Treasury bills which (to have) a maximum maturity of one year.

Liquidity. Since 1986, the government (to give) priority to fungible issues, so that subsequent bond issues can be added to existing lines of stock having the same financial and fiscal characteristics. Transparency. A number of organized procedures open to all investors (to keep) the market of French government debt transparent. With the exception of few specific operations arranged through traditional bank syndicates, the French Treasury (to place) its issues through competitive bidding.

Besides, the Treasury (to publish) a calendar of forthcoming auctions for future issues. Published at the start of the year, this provides investors with full and accurate information on the government's mediumand long-term borrowing program for the year.

Preparing for Economic and Monetary Union, the Treasury regularly (to issue) negotiable securities denominated in the Euro, and today the French government is one of the leading sovereign borrowers on the Euro market.

Another fast-growing market (to be) the market in stripped bonds, authorized in May 1991. These two are helping to increase the liquidity of the secondary market.

Words you may need:

public debt государственный долг to bear fruit приносить плоды

by virtue of благодаря, в силу чего-л. fungible bonds взаимозаменяемые облигации treasury notes казначейские облигации

discount treasury bills дисконтные казначейские векселя competitive bidding конкурентные торги

stripped bonds «ободранные» облигации

Ex. 11. a) Fill each gap with a suitable word from the box.

b)Sum up the text in 5-7 sentences and present them in class.

c)Describe the problems the authorities are trying to solve in China. attentiondiscoveredtakeagobondstransactionkinddealingmarkettraded (2)graduateslinepassbondtradingforeignersfreetraded

The Chinese Bond Market

China's government bond ______ , which is relatively new, is booming now. In July 1996 alone, some Rmb 220 billion worth of bonds changed hands on the Shanghai Stock Exchange.

Modest by international standards, perhaps, but impressive in a country where only three years_______the government funded most of its deficit by printing money.

Banks and securities houses seem confident that, with China's bond market now increasing rapidly in size, the underwriting of and trading in government bond issues will be a profitable ______ of business in the future.

Several securities companies______in bonds have already been set up. Other securities houses are in the process of organizing specialist departments to run their bond business.

The focus of this activity is the Shanghai Stock Exchange, where over 80% of China's government bonds are

______. Market participants disillusioned by the ups and downs in China's stock market are finding bonds a more secure _______ of investment, turning Shanghai into the country's principal government bond market. China's bond market is a relatively new one and, not surprisingly, most of the floor traders do not have a long_______track record.

Most are young, university_______with degrees in international finance from Shanghai universities. Before they can start trading they have to _______ a one-month intensive course organized by the Shanghai Stock Exchange and______an exam.

The Shanghai Stock Exchange has set a limit that one transaction cannot move the market more than 10% up or down from the preceding one.

However, to paint China's bond market as ______ from machinations would be misleading. People try to make the price go up and down, just as in the equity market. The most profitable activity is, of course, getting inside information on the central bank's plans about setting the interest rate.

Besides, short selling is a problem. Both paperless and physical bonds are_______on the Shanghai exchange. If a sell order for a paperless bond is placed and there is no bond in the account, the ______is automatically rejected by the computer. With paper bonds, short selling is_______only after trading at time of settlement, and has to be cancelled then. Fortunately, the Ministry of Finance is trying to issue more and more of its bonds in scripless form.

However, brokers warn that one disadvantage of moving to scripless form is that investors who want to buy and hold bonds tend to prefer physical evidence of their investments, and may not be so keen to buy scripless_______.

China has no central custodian. Under a programme sponsored by the Asian Development Bank, China's Ministry of Finance is implementing a project to build up a central depository in China.

The regulatory authorities are paying much _______ to the development of the REPO market since it has helped stimulate liquidity in China's bond market.

Although Ministry of Finance officials say they are keen to attract foreign investors the bond market is

likely to be closed to_______for at least a couple of years. Words you may need:

to fund the deficit финансировать дефицит to print money печатать деньги

ups and downs взлеты и падения

inside information внутренняя информация (для должностных лиц; не подлежащая использованию на рынке)

short selling «короткая продажа» account n операционный период на бирже

in scripless form (зд.) в электронном варианте ustodian n (зд.) хранилище ценностей

DISCUSSION

Ex. 12. a) Read the text.

b) Discuss the reasons which led to the creation of the UK debt market and its structural changes in the late 80s.

The UK Government bond market is generally the market of gilt-edged securities. These securities are considered to be very safe.

The market origins go back to 1694 when the Bank of England was founded to help the Government raise money to fight the French. Borrowing to finance wars has been common and the outstanding amount of debt has soared during all of the major wars since then. The major expansion, however, came in the post-World War II period, especially in the 1970s and early 1980s. Historically, the market developed with a strict separation between brokers and jobbers. The brokers did business with the public, but the jobbers did business only with brokers, and with each other.

On 27 October 1986 the market was structurally reorganized. As a result of the "Big Bang" the market switched to a new trading system, modelled on the US bond market. The essential change in this market was that a structure with separate jobbers and brokers was replaced with a structure with gilt-edged market makers (GEMMs) who deal directly with large customers.

The gilt-edged markets constitute the major proportion of money passing through the Stock Exchange. Transactions are typically much larger than in the equity market.

UK gilts consist of two distinct markets, the short gilts market (securities with five years or less to maturity) and the market for medium and long gilts.

Some time in the past there were forecasts that the gilt market would disappear by the end of the century. The Big Bang reforms succeeded in achieving one of the key objectives – to make the market accessible and attractive to international investors. There has been an increasing trend towards investors moving funds between the major bond markets, taking views on both the bonds themselves and the currencies involved. Now, in its current form it is firmly in the mainstream as one of the world's most actively traded bond markets.

As to the UK corporate bond market, it has had a mixed history. Historically, it has been a major source of corporate funds but issuance virtually stopped during the 1970s and early 1980s due to high inflation and large government issuance.

In the last few years, the market has sprung to life again, helped by the fall in long-bond yields due to

inflation fall and temporary disappearance of the government's borrowing requirements. Words у он may need:

gilt-edged securities золотообрезные ценные бумаги origin n происхождение

the outstanding amount of debt размер непогашенного долга soar v стремительно повышаться

broker n брокер jobber n джоббер

Big Bang «Бит бенг» (реорганизация Лондонской фондовой биржи) accessible adj доступный

mainstream n основное направление, главная линия

Ex. 13. Read the dialogue, sum up its content and act it out:

Eurobond Market

Russian: What is a Eurobond? Why are Eurobonds issued?

Foreigner: Eurobond is a bearer security, which is not registered and issued in a market other than that of its currency of denomination. Eurobonds are sold internationally and not in just one domestic market to obtain credits in foreign financial markets.

R.: What organizations can issue Eurobonds?

F.: As a rule, Eurobonds are issued by governments, municipalities, banks, international financial organizations, national companies and trasnationals.

R.: How is a bond placement arranged?

F.: Most often, primary placing of Eurobonds is done by investment banks, which act as lead managers. In such cases investment banks provide a number of advisory services. They give recommendations to issuers about the date of issue, currency of issue, coupons, methods of issuing securities, preparation of the necessary documents, etc.

R.: What is the typical maturity of Eurobonds?

F.: Eurobonds usually mature in five or more years, and have a fixed rate of interest. R.: How is the bond price determined?

F.: It is done on the basis of the credit rating of the issuer. Debt issues are rated according to the credit ratings determined by various financial companies including Moody's, Standard and Poor's. The highest rating assigned by Standard and Poor's is AAA. It means that the capacity to pay the interest and repay the principal sum is extremely strong.

R.: And how often are interest payments made?

F.: Once or twice a year. It's important to say that Eurobonds are not taxed.

R.: How is the market developing?

F.: It has become one of the world's largest markets for short-term funds. Turnover in the market is now reckoned to be greater than the combined turnover of the New York and London stock exchanges.

R.: As you've said, investment bankers are the main intermediaries in this market, specializing in assisting firms to obtain new financing. And why is the market so attractive to borrowers?

F.: The market is outside the direct control of any national central bank, so it is free, competitive and flexible. It is characterized by relatively low capital costs for borrowers. Issuers can get cheap credits. I've