The name comes from the fact that they are similar to Australian government bonds (which are called “Koala” bonds), but they have more tax benefits than their local counterparts.
There are also other types of Kangaroo bonds that trade on the ASX (Australian Stock Exchange) or other exchange markets, such as Eurobonds and Yankee Bonds.
This article looks at what Kangaroo bonds are, how they work, and their benefits and limitations.
What is a Kangaroo bond?
A Kangaroo bond is an investment security denominated in a currency other than that of the issuing country.
A Kangaroo bond is also known as a foreign currency bond or foreign-denominated bond.
How does a Kangaroo Bond work?
Kangaroo bonds are issued in Australian dollars, and they work like normal bonds.
They’re usually issued by the Australian government at a fixed rate, with a fixed maturity date.
A big difference between Kangaroo Bonds and other types of bonds is that you can only buy them on the secondary market, not directly from the government.
If you want to buy a Kangaroo Bond, you have to go through a broker or dealer who will sell it on your behalf.
The issuer is usually the Australian government, but it could also be a state government or another entity that has been given permission by the Australian Government to issue these bonds.
Benefits of Kangaroo Bonds
- They offer high yields compared to other bonds.
- They provide diversification since they’re issued by countries outside of the issuer’s home country.
- They can be traded on foreign exchanges which makes them flexible and easy to buy or sell at will.
- Due to their low-risk nature, kangaroo bonds provide investors with peace of mind that their money is safe and secure for future use.
Limitations of Kangaroo Bonds
- Kangaroo bonds are not eligible for inclusion in the calculation of gross external debt.
- The kangaroo bond market is relatively small.
Key points
- The Kangaroo bond is a good source for foreign investors as well as local investors that can benefit from the high yield.
- It also allows investors to diversify their portfolios, especially in the case of investment firms.
- The bond comes with various benefits and limitations that need to be taken into consideration before investing.
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