Kangaroo Bonds

Kangaroo Bonds are bonds denominated in Australian dollars and issued in Australia by foreign firms, used to attract Australian investors while diversifying funding sources.
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Definition

Kangaroo Bonds are bonds issued by non-Australian companies, financial institutions, or governments in the Australian market, and denominated in Australian dollars (AUD). These bonds allow foreign entities to access Australian capital markets, thereby diversifying their investor base and tapping into additional sources of capital.

Examples

  1. European Bank for Reconstruction and Development (EBRD): The EBRD has issued Kangaroo Bonds to fund its operations while diversifying its investor base.
  2. Ford Motor Credit Company: An American company like Ford issuing Kangaroo Bonds to attract Australian investors and diversify its funding sources.
  3. Asian Development Bank (ADB): The ADB might issue Kangaroo Bonds to support its projects while taking advantage of the favorable borrowing terms in the Australian market.

Frequently Asked Questions

What is the purpose of Kangaroo Bonds?

Kangaroo Bonds provide an opportunity for foreign entities to raise capital from Australian investors. They help in diversifying funding sources and expanding the investor base.

Who typically issues Kangaroo Bonds?

Typically, non-Australian governments, multinational corporations, international financial institutions, and supranational organizations issue Kangaroo Bonds.

What are the benefits for Australian investors?

Australian investors benefit from having access to high-quality foreign issuers, portfolio diversification, and potentially higher yields compared to domestic bonds.

How do Kangaroo Bonds affect the issuer’s financial strategy?

Issuing Kangaroo Bonds allows foreign entities to enter new markets, raise funds in different currencies, and reduce currency risk provided they operate or have liabilities in Australian dollars.

Are there any risks associated with Kangaroo Bonds?

For investors, risks include currency risk if hedging is not performed, credit risk of the issuer, and potential political and economic changes affecting bond prices.

  • Eurobonds: Bonds issued in a currency. not native to the issuer’s home country and sold in international markets.
  • Masala Bonds: Bonds issued outside India but denominated in Indian Rupees.
  • Maple Bonds: Bonds issued in Canada by foreign entities and denominated in Canadian dollars.
  • Samurai Bonds: Bonds issued in Japan by foreign entities and denominated in Japanese yen.

Online References

  1. Investopedia - Kangaroo Bond
  2. Australian Securities Exchange (ASX) Overview
  3. Financial Times Lexicon - Kangaroo Bond

Suggested Books for Further Studies

  1. “Debt Markets and Analysis” by R. Stafford Johnson: This book provides comprehensive coverage of debt instruments, including a segment on international bonds like Kangaroo Bonds.
  2. “Bond and Money Markets: Strategy, Trading, Analysis” by Moorad Choudhry: Enhances understanding of global bond markets with examples of Kangaroo Bonds.
  3. “International Finance” by Keith Pilbeam: Explores international finance concepts and practices, including funding through international bonds.

Fundamentals of Kangaroo Bonds: Finance Basics Quiz

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