Bulldog Bond

A bulldog bond is a sterling-denominated bond issued in the United Kingdom by a foreign borrower. The issuer is not British, but it raises capital from UK investors by selling debt in British pounds under UK law. The name comes from the English bulldog as a symbol of Britain. Bulldog bonds belong to the same family as Yankee bonds in the United States, Samurai bonds in Japan, and Matador bonds in Spain: each is a foreign bond denominated in the host country's currency and sold in that country's capital market.

Think of a bulldog bond like a French restaurant opening a branch in London and pricing its menu in pounds: it is operating in a foreign market under that market's rules and currency.

Foreign Issuers Choose the UK Market to Lower Borrowing Costs

A foreign corporation or government issues a bulldog bond when UK interest rates are lower than rates available in its home market, making sterling-denominated debt cheaper than domestic alternatives. By issuing in sterling, a company that earns revenue in pounds also eliminates the currency conversion risk it would otherwise face when paying interest in its home currency.

The UK capital market is one of the deepest and most liquid fixed income markets in the world. Access to that liquidity allows foreign issuers to raise large amounts efficiently, often at tighter spreads than they could achieve in less developed markets.

The First Bulldog Bond Was Issued in 1870

The Buenos Aires Western Railway Company issued what is recognized as the first bulldog bond in 1870, raising capital from London investors to finance South American railway construction. London dominated global capital markets throughout the 19th century, and the bulldog bond market grew as foreign sovereigns and corporations accessed that pool of capital.

The market contracted significantly after World War I and took decades to recover. Today, issuers in the bulldog bond market include multilateral development banks, sovereign governments, and large multinational corporations seeking to diversify their funding sources.

London Stock Exchange Listings Provide Tax and Settlement Advantages

Bulldog bonds are typically listed on the London Stock Exchange, which provides access to a deep secondary market and enhances price discovery. The listing also qualifies bonds for an important UK tax benefit: the UK does not impose withholding tax on interest paid to bondholders for bonds listed on a recognized stock exchange.

Transactions settle through Euroclear, Clearstream, or CREST, the UK's central securities depository. Issuers must comply with the Financial Services and Markets Act 2000 for disclosure requirements. Maturity terms typically range from five to ten years, though some issues extend further.

Sources:
https://accountinginsights.org/what-is-a-bulldog-bond-and-how-does-it-work/
https://www.acquire.fi/glossary/bulldog-bond-definition-fixed-income
https://www.supermoney.com/encyclopedia/bulldog-bond
https://www.sciencedirect.com/topics/economics-econometrics-and-finance/international-bond