PROJECT SUMMARY

The goal of this project is to investigate the origins and evolution of the Eurobond market. Born in 1963 with the subscription in London of a dollar bond for an Italian company after years of sluggish international financial activity since the Great Depression, the Eurobond market (i.e., the market of international securities denominated in a currency other than the home currency of the country in which it is issued) experienced a dynamic expansion in the decades that followed the end of Bretton Woods in the early 1970s. Over the last sixty years, the Eurobond market has grown at two-digit average rate levels with tens of trillions of dollars of outstanding securities, becoming a cornerstone of international financial markets. Moreover, in a context of low-interest rates and high international liquidity since the Global Financial Crisis of 2008–09, foreign bond issuances have flourished to unprecedented levels. However, despite its preponderant role in international finance and global capital flows, the historical dynamics and institutional foundations of modern bond finance during its early and consolidation years have eluded serious scholarly attention so far. To meet its goal, the project will pursue three specific original aims.

First, it will study the creation and milestones of the Eurobond market by addressing two important questions that have not been fully explored: How was the Eurobond market established, and what factors led to its growth over time? This will be done through careful archival research based on primary and secondary sources from key market participants. Most notably, the project will explore the records and documents of the Italian company Autostrade, the first Eurobond issuer in 1963, along with archives from banks, regulators, and bondholder associations in London and the U.S. Based on original archival research, the project will provide qualitative evidence on the factors and issues that drove the emergence and evolution of the Eurobonds both at a national and international level.

A second aim of this project is the reconstruction of the time series of Eurobond quotations and yields with an unprecedented geographic scope and granularity to produce the basis for a novel and distinctive way to assess how bonds behaved and evolved over time. Data will be gathered from the Financial Times, where the thousands of bonds from borrowers worldwide were reported by the Association of International Bond Dealers (AIBD) in the 1970s and 1980s. The database will allow us to study the behaviour and performance of the market across different countries and regions in one of the most turbulent periods of modern financial history. It will cover a period spanning the breakdown of the Bretton Woods monetary system, the two oil shocks of 1973 and 1979, and the international debt crisis outbreak in 1982 – the first global financial meltdown in the postwar era. Further sources such as bank reports and the financial press will be consulted, and archival research conducted, to expand the dataset to the 1960s and early 1990s and cover crucial developments of the market during these years.

The third aim of the project is to determine who accessed the Eurobond market, when, and why in order to engage with current debates about the functioning of the sovereign and corporate debt markets. To this purpose, we will examine the impact of factors such as foreign bank lending, individual borrowers’ characteristics, and episodes of crises on the behaviour of Eurobonds. While international loans suffered from serial defaults and rescheduling in the 1980s, the Eurobond market continued to operate without significant disruptions, paving the way for the development of bond finance that came to dominate global capital flows from the 1990s onwards. Examining how banks responded to the issue of international debt and the need for liquidity and marketable claims will contribute to better apprehending the circumstances under which new financial practices such as securitisation emerged that transformed financial markets lastingly. The project will combine quantitative and qualitative methodologies and rely on a new set of data to assess how the relationship between borrowers and lenders was shaped and managed, what services were exchanged among actors, and how the participants assessed risk.