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Q: Swiss franc bonds ( No Answer,   1 Comment )
Question  
Subject: Swiss franc bonds
Category: Business and Money > Finance
Asked by: missmallprincess-ga
List Price: $4.50
Posted: 27 May 2004 08:50 PDT
Expires: 01 Jun 2004 08:00 PDT
Question ID: 352698
I have noticed that the interest rate in Switzerland is below the
rates in most other countries.  I am, therefore, suggesting that my
company should make an issue of Swiss franc bonds.  What
considerations should I first to take into account?
Answer  
There is no answer at this time.

Comments  
Subject: Re: Swiss franc bonds
From: geotechnical-ga on 31 May 2004 09:23 PDT
 
Be forewarned that I am just answering this off the top of my head,
but these factors are relevant:
Assuming your company is in the U.S., and conducts it's business in
dollars, you will want to consider 1)the exchange rate (FX) & FX rate
trend,
2)balance of trade between Switzerland (SZ) and US
3)the inflation rates of both countries
4)rate of growth in GDP in both.

You want dollars. So the FX rate is going to determine how much your
offering is going to have to be. The weaker the dollar the more you
are going to have to issue in bonds to get the capital you need. If
the dollar gets weaker over time then the SZ francs to pay your
coupons on the bonds are going to cost more later than they would
today, i.e. you will be paying an additional amount above the coupon
rate to satisfy your interest obligations to your bond holders.  This
could work out to be more than you will be paying if you just issued
the bonds here in the US.

Changes in the inflation rate in SZ will affect the market interest
rate and so the future value of your bonds.

GDP growth and the trade balance will affect the future FX rate.

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