We explore the recent development of the foreign bond market-termed Kangaroo Bonds in Australia. Initially a perspective is provided on the scale and scope of this market with particular attention paid to the characteristics of issuers. Overwhelmingly this market is high-credit quality and comprises sovereign, supranational or major financial institutions. Investors appear to have a preference for simple fixed rate pricing structures, which require issues to then swap bond proceeds into the currency and coupon type of choice. Consequently, the highly liquid Australian foreign exchange and derivatives markets, which easily accommodate risk transformation, appear as an important facilitator to foreign and ultimate local bond market development. Impediments to market development and implications for other markets are considered.
Previously published in the proceedings of the AsianFA/FMA 2006 Conference