Euro Medium-Term Notes (EMTNs)

Unsecured debt instruments that mature in five to 10 years

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What are Euro Medium-Term Notes (EMTNs)?

Euro medium-term notes, or EMTNs, are unsecured debt instruments that mature in five to 10 years. They are usually issued in countries that deal with euro currencies. Euro currency is a type of currency that is held outside of the country of origin. EMTNs provide investors with an opportunity to access foreign currencies and markets.

Euro Medium-Term Notes (EMTNs)


  • Euro Medium-Term Notes (EMTNs) are issued outside the US and Canada and in the markets that deal euro currencies. The securities enable investors to get access to foreign currencies.
  • EMTNs pay a higher rate of interest. Since the securities are customized to the needs of the investor, they involve high dealer expenses.
  • They are unsecured debt securities, which means that if the issuer defaults, the investor has little recourse to collect the principal amount as there are no assets to back the debt.

Example of Euro Medium-Term Notes

As an example, consider Banco Latinoamericano de Comercio Exterior, a bank in Panama, that offers euro medium-term notes to investors. The notes will bear an interest rate of 3.25% per year, starting on May 7, 2015, and will mature on May 7, 2020. The interest is paid on May 7 and November 7 every year, with the first interest to be paid on November 7, 2015.

Moody’s rating of Baa2 for the Banco Latinoamericano de Comercio Exterior indicates that the note comes with moderate credit risk. It means that the risk that the Panamian bank defaulting is lower than average. Also, it is a fixed-interest, medium-term note.

Advantages of Euro Medium-Term Notes

  1. Euro medium-term notes pay a higher interest rate compared to other short- term investments.
  2. EMTNs help investors gain access to new markets and currencies.
  3. Since euro medium-term notes are transferred from the issuer to the investor, the entity can raise money privately.

Disadvantages of a Euro Medium-Term Note

  1. Euro medium-term notes are expensive and the premium can offset the interest received by the investor, thereby leaving very little earnings to the investor.
  2. Since the notes involve other foreign currencies, the laws of the foreign jurisdiction would apply.

Risk with Medium-Term Notes

More than a decade ago, Lehman Brothers, which was one of the biggest investment banks in the world, issued medium-term notes with a face value of $1,000 and promised returns based on the performance of the S&P 500 Index. Lehman brothers publicized the notes as offering huge earning potential, as they were matched to the S&P 500 Index and also guaranteed 100% return of the principal amount within three months in case of default.

However, when Lehman Brothers declared bankruptcy in 2008, investors could not recover the principal amount, as a release clause stated that it depended on the creditworthiness of the bank. Hence, when the notes defaulted investors were forced to sell the notes in the secondary market for around 10-55 cents on the dollar.

Euro Medium-Term Note Program

EMTN programs are meant to be offered outside the U.S. As many companies have a constant need for capital, these programs provide easy access to the notes, as constant submission of documents is not required.

While U.S. companies have Euro MTN and U.S. MTN programs, European companies usually maintain only Euro MTNs. A European company can maintain a U.S. MTN if it is registered with the Securities Exchange Commission (SEC) in the U.S. A non-European company and a non-U.S. company can have a European MTN if they want to issue the debt securities in the European markets.

Related Readings

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