Bulldog Bond – Definition

Cite this article as:"Bulldog Bond – Definition," in The Business Professor, updated June 10, 2019, last accessed October 28, 2020, https://thebusinessprofessor.com/lesson/bulldog-bond-definition/.


Bulldog Bond Definition

Bulldog bond is a name used to refer to the United Kingdom foreign security market. It is a type of bond issued in the United Kingdom by foreign banks or firms. The bond is issued when a foreign firm wants to raise capital from investors within the United Kingdom.

In other words, it is an internal market where foreign investors (not living in the United Kingdom) can have their bonds purchased and sold. Bulldog bond is usually traded in British sterling pounds.

The reason why a bulldog bond is traded within the UK is that it is the only marketplace where the sterling bond is likely to be the most liquid. This is contrary to other bonds like Eurobond which can be traded in any part of the world.

A Little More on What is a Bulldog Bond

Foreign bonds such as bulldog bond give foreign investors access to a foreign capital market from which they can raise capital. When a firm is in need of foreign currency or anticipates that it may get favorable interest rates in the foreign market, it may decide to trade in that particular market.

The firm may do this by issuing bulldog bonds also known as a foreign bond. For instance, if firm ABC is seeking to raise capital fund in the United Kingdom’s debt market, it can do so by issuing a bulldog bond. This is transacted using the British sterling pound.

The transaction of bulldog bond is usually done by a single bank or a group of domestic banks in British pounds. This type of bond is given out when the United Kingdom’s interest rates are down compared to that of the foreign firm’s domestic interest rates. When a bulldog bond is issued, it lowers the investor’s cost of borrowing since he or she will be purchasing them at a lower price.

This bond is closely similar to a Yankee bond. A Yankee bond is traded in the United States security market. It is transacted in the US dollar currency. It enables non-Americans firms to buy and purchase bonds in the United States. This way they are able to acquire the capital they need in US dollars.

Other countries also have foreign bonds related to a bulldog bond. They include:

  • Kangaroo bond (Australia market)
  • Samurai bond (Japan market)
  • Maple bonds (Canada market)
  • Matador bonds (Spain market)
  • Rembrandt bonds (Netherlands market)

The following are reasons why a bulldog bond is popular:

  1. The bulldog bond trades in the sterling pound, a currency which is among the major world’s financial currencies exchange. Because of sterling pound’s value in the biggest financial markets, the bond is, therefore, considered stable, hence a less risky investment venture.
  2. Historically, the British foreign bond market was at some point involved with some of the world’s leading markets such as Australia, India, and Hong Kong. Through the bulldog bonds, these countries were able to trade at low risk. This resulted in British sterling pound remaining dominant in different parts of the world, and financial markets hence increasing its popularity.

Reasons for Issuing Bulldog Bonds

The following are reasons why bulldog bonds are issued:

  • To reduce exchange rate risks
  • To ensure currency stability
  • To increase interest rates
  • To meet investors demands of various types of bonds

Advantages of Trading in a Bulldog Bond

Foreign firms can benefit from the bulldog bond in the following ways:

  1. Helps foreign firms to be able to raise capital from outside their country which is usually at a lower cost compared to that in their country. This means bulldog bond gives investors the advantage of the low cost of borrowing.
  2. It enables investors to capitalize on the interest. This is because when they anticipate higher interest rates in the foreign market, they invest in the market so as to get more returns on their investment capital.
  3. Investors with a desire to expand in other geographical regions are able to diversify their portfolio through the bulldog bond. In other words, a bulldog bond gives them the opportunity to be able to access more capital from foreign markets with which they can use to expand their businesses.
  4. It reduces exchange rates risks. This is so where the bond is used to reduce debt that is also in sterling pounds.

Risks Associated with Bulldog Bond Trade

When the market is favorable, trading in bulldog bonds brings financial gain to the investor. However, it can also come with some risks. There is one major risk that has been identified that has to do with trading in a bulldog bond:

When trading in a bulldog bond, there is foreign exchange risk that an investor experience especially when the market is not favorable. For instance, when there is a change in the value of the British sterling pound in relation to the investor’s currency, the investor will incur losses.


Through a bulldog bond comes with lots of benefits as mentioned above, it can also be risky especially when the market is not favorable. It is, therefore, important for investors wishing to venture into this type of foreign bond to take precautions.

Therefore, investors need to carefully assess the risks associated with investing in this kind of market bond against its possible benefits. The evaluation will help the investors to make an informed choice with regard to investing in bulldog bond.

References for Bulldog Bond

Academic Research on Bulldog Bonds

What Influence Firms to Issue International Bond? An Empirical Study of Relationships between Bond Financing and Firms’ Financial Characteristics, Chapagain, G. (2009).

The Sterling Bond Markets and Low Carbon or Green Bonds, Veys, A. (2010).


International Long-Term Financing, Capital Structure and the Cost of Capital, Moosa, I. A. (2003). In International Financial Operations (pp. 271-293). Palgrave Macmillan, London.

How firms borrow in international bond markets: securities regulation and market segmentation, Fuertes, A., & Serena, J. M. (2016).

Foreign bond markets and financial market development: international perspectives, Batten, J. A., Hogan, W. P., & Szilagyi, P. G. (2012). Implications of the global financial crisis for financial reform and regulation in Asia, 248.

The International Government Bond Market, Hagiu, A. (2010). Acta Universitatis Danubius. Ĺ’conomica, 4(1).

The Currency Denomination Decision: Do Firms Seek Bargains in International Bond Markets?, McBrady, M., & Schill, M. (2005). University of Virginia working paper.

Interest-Free Treasury Bonds (IFTB), Bidabad, B. (2011). Management Science, 3(3).

The eurobond market, Choudhry, M. (2008). Handbook of Finance, 1.

International Perspectives on Foreign Bond Markets, Batten, J. A., Hogan, W. P., & Szilagyi, P. G. (2009)

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