Dual Currency Issue


DEFINITION of 'Dual Currency Issue'

A bond that pays interest in one currency but pays the principal in a different currency. The amount of the principal repayment is set at initiation and paid at maturity. This principal amount usually allows for some appreciation in the exchange rate of the stronger currency. These issues are common in the Eurobond market and are a useful source of capital for multinational companies.

BREAKING DOWN 'Dual Currency Issue'

There are three methods used in applying the exchange rate to principal and interest payments from dual currency bonds:

1. The use of the prevailing exchange rate when the bond is issued

2. The use of the existing exchange rate (spot rate) at the time cash flow payments are made

3. The use of the currency that is chosen from the two currencies by the investors or issuers of these bonds - also known as an "option currency bond"

  1. Currency

    Currency is a generally accepted form of money, including coins ...
  2. Exchange Rate

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

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

    A bond issued in a currency other than the currency of the country ...
  5. Spot Price

    The current price at which a particular security can be bought ...
  6. Dual Currency Deposit

    A fixed deposit with variable terms for the currency of payment. ...
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