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The Role of Foreign Bond Issuance: The Case of Australia
Author(s) -
Batten Jonathan A.,
Hogan Warren P.,
Szilagyi Peter G.
Publication year - 2011
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.2010.00619.x
Subject(s) - issuer , business , bond , local currency , financial system , currency , coupon , bond market , counterparty , eurobond , foreign exchange swap , liberian dollar , monetary economics , foreign exchange risk , interest rate , finance , economics , credit risk
We examined the recent development of the foreign bond—termed Kangaroo bond—market in Australia. Overwhelmingly, issuers in this market are of high credit quality and comprise sovereign, supranational and major international financial institutions. Local institutional investors have a preference for simple, fixed‐rate pricing structures, with foreign issuers reliant upon converting their Australian dollar‐denominated bond proceeds into the currency and coupon type of choice using cross‐currency swaps. The Kangaroo bond issuers provide a natural counterparty to Australian residents issuing in foreign currency in offshore markets, where cross‐currency swaps allow them to easily convert their proceeds into Australian dollars.