What does "Yankee/Foreign" mean?

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TimM
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What does "Yankee/Foreign" mean?

Post by TimM » Fri Sep 13, 2019 9:28 am

Here is a really simple question. I was looking at how the Prime Money Market and Federal Money Market funds are invested. For each fund there is a portfolio category called "Yankee/Foreign". What does this term mean?

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Tim
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robertmcd
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Re: What does "Yankee/Foreign" mean?

Post by robertmcd » Fri Sep 13, 2019 9:32 am

It is a foreign bond issued by a bank or company that is denominated in US dollars.

gwe67
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Re: What does "Yankee/Foreign" mean?

Post by gwe67 » Fri Sep 13, 2019 9:33 am

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alex_686
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Re: What does "Yankee/Foreign" mean?

Post by alex_686 » Fri Sep 13, 2019 9:36 am

This dates back to the 70s and some badly though out polices on interest rates and currency controls. These regulations have since been repealed but it did create a market.

It is dollar dominated bonds issued outside of the US and thus outside of US regulations. Lots of internal trade are done in dollars, so lots of international companies doing business with other international companies need dollars. In this case it is just easier to issue the US dollar bonds in London or Paris. Hence, British banks issuing US "Yankee" bonds.

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Phineas J. Whoopee
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Re: What does "Yankee/Foreign" mean?

Post by Phineas J. Whoopee » Fri Sep 13, 2019 7:54 pm

I'm afraid a prior answer is incorrect.

A Yankee bond, as they're called, is a bond issued inside the US, under US law, by a borrower headquartered outside the United States.

A bond denominated in US Dollars issued outside the US under non-US law is called a Eurodollar bond, even if the issuer is based elsewhere than Europe. When the phenomenon first arose they were all from Europe, and the Euro currency didn't yet exist. We just kept using the old term as the financial system globalized.

A Yankee is little different from an ordinary US bond. Eurodollar bonds carry additional risks, including legal and regulatory, and typically are classified as foreign. One of the reasons Argentina is having difficulties right now is it issued Yankees but can't obtain enough USD to pay as promised. That's why some of its problems have been litigated in US federal courts.

One time I had to correct a colleague who thought Eurodollar meant the Euro currency.

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Re: What does "Yankee/Foreign" mean?

Post by typical.investor » Fri Sep 13, 2019 9:00 pm

Phineas J. Whoopee wrote:
Fri Sep 13, 2019 7:54 pm
I'm afraid a prior answer is incorrect.

A Yankee bond, as they're called, is a bond issued inside the US, under US law, by a borrower headquartered outside the United States.

A bond denominated in US Dollars issued outside the US under non-US law is called a Eurodollar bond, even if the issuer is based elsewhere than Europe. When the phenomenon first arose they were all from Europe, and the Euro currency didn't yet exist. We just kept using the old term as the financial system globalized.

A Yankee is little different from an ordinary US bond. Eurodollar bonds carry additional risks, including legal and regulatory, and typically are classified as foreign. One of the reasons Argentina is having difficulties right now is it issued Yankees but can't obtain enough USD to pay as promised. That's why some of its problems have been litigated in US federal courts.

One time I had to correct a colleague who thought Eurodollar meant the Euro currency.

Please follow the links for more information.

PJW
And don't forget the "reverse Yankee" .... U.S. companies have ramped up issuance of euro-denominated bonds, known as “reverse Yankees,” to a total of €28.46 billion ($32.31 billion) so far this year.

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Re: What does "Yankee/Foreign" mean?

Post by Phineas J. Whoopee » Fri Sep 13, 2019 9:31 pm

typical.investor wrote:
Fri Sep 13, 2019 9:00 pm
...
And don't forget the "reverse Yankee" .... U.S. companies have ramped up issuance of euro-denominated bonds, known as “reverse Yankees,” to a total of €28.46 billion ($32.31 billion) so far this year.
That's a valuable addition, typical.investor. Thank you. Here's a Wikipedia paragraph about them.

PJW

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Re: What does "Yankee/Foreign" mean?

Post by abuss368 » Fri Sep 13, 2019 10:23 pm

Essentially they are foreign bonds issued by a company denominated in US dollars. Total bond Index includes international bonds.
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Re: What does "Yankee/Foreign" mean?

Post by abuss368 » Fri Sep 13, 2019 10:23 pm

Thank you for sharing. That had a nice overview.
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Re: What does "Yankee/Foreign" mean?

Post by Phineas J. Whoopee » Sat Sep 14, 2019 4:27 pm

As I carefully documented in my explanation upthread, abuss368 is entirely incorrect.
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Last edited by Phineas J. Whoopee on Sat Sep 14, 2019 4:46 pm, edited 2 times in total.

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Re: What does "Yankee/Foreign" mean?

Post by abuss368 » Sat Sep 14, 2019 4:49 pm

Phineas J. Whoopee wrote:
Sat Sep 14, 2019 4:27 pm
As I carefully documented in my explanation upthread, abuss368 is entirely incorrect.
PJW
Please review Total Bond Index listing of individual bonds held by the fund. Approximately 5% +- of the fund holds bonds from international borrowers issued in USD. Believe these may be the "yankee" bonds being discussed.
Last edited by abuss368 on Sat Sep 14, 2019 4:59 pm, edited 2 times in total.
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Re: What does "Yankee/Foreign" mean?

Post by abuss368 » Sat Sep 14, 2019 4:51 pm

Phineas J. Whoopee wrote:
Fri Sep 13, 2019 7:54 pm
One time I had to correct a colleague who thought Eurodollar meant the Euro currency.
Huh? :D
John C. Bogle: "Simplicity is the master key to financial success."

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Re: What does "Yankee/Foreign" mean?

Post by abuss368 » Sat Sep 14, 2019 4:58 pm

Essentially a Yankee bond is a bond issued in the United States from a borrower outside the United States.
John C. Bogle: "Simplicity is the master key to financial success."

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