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What is the Yankee Bond Market?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 16 August 2016
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    Conjecture Corporation
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The Yankee bond market presents an excellent opportunity for investors in the United States to participate in market deals that involve corporations, banks, and governments that are not headquartered within the country. Utilizing the time honored nickname for Americans, the Yankee bond market trades dollar-denominated bonds that are issued in the United States by foreign entities that meet the standards set by the Securities and Exchange Commission.

The ground rules that help to govern the issuing of Yankee bonds by foreign corporations is found in the Securities Act of 1933. Essentially, the act sets the standards that must be met by foreign corporations before any bond issue can take place. Along with complying with the regulations outlined in the Securities Act, the bonds must also be registered with the Securities and Exchange Commission. Because the process is so comprehensive, it is not unusual for a new bond issue to take over three months to complete offered to the traded on the Yankee bond market, and thus be accessible to investors.

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One important aspect of preparation to trade on the Yankee bond market is the determination that the foreign entity is credit worthy to issue bonds within the United States. This is often accomplished by utilizing debt rating agencies to evaluate the financial condition of the entity, and determine the stability of the bond issue offering. Foreign corporations and governments are usually willing to go through this comprehensive evaluation because the ability to issue bonds in the United States can allow the entity to take advantage of periods when interest rates are low and the entity can enjoy payments at a lower rate of interest.

While the Yankee bond market offers a significant investment opportunity, the market is not the best fit for all types of investors. In many instances, the bonds are issued in tranches, with an individual offering exceeding one billion US Dollars. This can put the bonds on the Yankee bond market out of the reach of many small investors, but the offering still provides an excellent chance for large investors, such as US based companies, the chance to realize substantial profits from trading on the Yankee bond market.

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