What are yankee bonds and what additional requirements must foreign issuers meet to issue them?

Yankee bonds are US dollar-denominated bonds issued in the United States by non-US entities. They are registered with the SEC and subject to US securities regulations.

SEC Registration Requirements:

1. Form F-1 or F-3: Foreign issuers must file a registration statement containing financial statements reconciled to US GAAP (or prepared under IFRS as issued by the IASB)
2. Annual reporting: Ongoing filing of Form 20-F (annual report for foreign private issuers)
3. Rating requirement: While not legally required, the market effectively requires at least one rating from a major agency (Moody's, S&P, Fitch)
4. Sarbanes-Oxley compliance: CEO/CFO certification of financial statements

Yankee vs. Eurodollar Bonds:

Why Choose the Yankee Market:

1. Largest bond market globally: The US fixed income market exceeds $50 trillion, providing unparalleled depth and liquidity
2. Lower yields: Strong demand from US institutions often results in tighter spreads than Eurobond issuance
3. Prestige and visibility: SEC registration signals transparency and governance quality
4. Broad investor base: US mutual funds, pension funds, insurance companies, and endowments

Example:

When Nordvik Telecom (a Norwegian company) compares issuance options for a $750M 10-year bond:

• Yankee bond yield: 4.85% (but $2M registration costs)
• Eurodollar bond yield: 5.05% (lower issuance cost at $0.5M)
• Savings from yankee: 20 bps x $750M = $1.5M/year, far exceeding the higher registration cost

CFA Exam Tip: Know the distinction between yankee (SEC-registered, US market), Eurodollar (unregistered, outside US), and global bonds (registered and offered simultaneously in multiple markets).

Practice international bond classifications in our CFA fixed income question bank.