Fear of the orphan bond is stalking Europe. This is the fear that, after the introduction of the euro in 1999, bonds in the national currencies whose exchange rates are locked will lose liquidity. They will have no benchmarks to trade over.
With the elimination of exchange and interest rate differences, investors will gravitate towards the biggest euro benchmarks. Market makers will lose interest in classes of bonds destined sooner or later to disappear. By 2002 all payment of interest and principal must be made in euro.
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