Dual Currency Bond


DEFINITION of 'Dual Currency Bond'

A debt instrument in which the coupon and principal payments are made in two different currencies. The currency in which the bond is issued, which is called the base currency, will be the currency in which interest payments are made. The principal currency and amount are fixed when the bond is issued.

BREAKING DOWN 'Dual Currency Bond'

Dual currency bonds are subject to exchange rate risk. If the currency in which the principal will be repaid appreciates, the bondholder will make money; if it depreciates, he or she will lose money. Investors can use dual currency swaps, which have a fixed exchange rate at issuance, to offset the exchange risk of dual currency bonds.

  1. Coupon

    The interest rate stated on a bond when it's issued. The coupon ...
  2. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  3. Currency Forward

    A binding contract in the foreign exchange market that locks ...
  4. Dual Currency Swap

    A currency swap used to hedge the risk associated with the issuance ...
  5. Eurobond

    A bond issued in a currency other than the currency of the country ...
  6. Dual Currency Issue

    A bond that pays interest in one currency but pays the principal ...
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