FACTORS TO CONSIDER WHEN CHOOSING BETWEEN EUROMARKETS OR DOMESTIC MARKETS


(a) The currency that the borrower wants to obtain

Multinational companies usually want to borrow in foreign currency to reduce their foreign exchange exposure and therefore borrow in euromarkets rather than the domestic market.

(b) The cost

There is often a small difference in interest rate between eurocurrency and domestic markets. On large borrowings, however, even a small difference in interest rate result in a large difference in the total interest charged on the loan.

(c) Timing and speed

It may be possible to raise money on the euromarket more quickly than in the domestic markets.

(d) Security

Euromarket loans are usually unsecured. Whereas domestic market loans are more commonly secured. Large borrowers may therefore prefer euromarkets.

(e) The size of the loans

It is often easier for a large multinational to raise very large sums on the euromarkets than in a domestic financial market.