Type of bond instrument, You are an investment banker who is advising a Euro bank about

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Type of bond instrument

You are an investment banker who is advising a Euro bank about the new international bond offer it is considering. Proceeds are to be used to fund Eurodollar loans to the bank clients. Specify the type of bond instrument you would recommend that bank should consider while issuing and why?

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As Euro bank wishes to use the bond proceeds in order to finance the Eurodollar loans, which are the floating-rate loans, investment banker must recommend that the bank issue FRNs, that are a inconsistent rate instrument. Therefore there will a correspondence between the interest rate bank pays for the funds and interest rate it receives from its loans. Such as, if bank regularly makes term loans at indexed to 3-month LIBOR, it would want to issue the FRNs, also, indexed to 3-month LIBOR.

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