Homework answers / question archive / THE KANGAROO BONDS AND BLOCKCHAIN BOND-I’s Kangaroo bonds or Matilda bonds are Australian dollar-denominated bonds issued by non-Australian issuers after complying with local laws and regulations

THE KANGAROO BONDS AND BLOCKCHAIN BOND-I’s Kangaroo bonds or Matilda bonds are Australian dollar-denominated bonds issued by non-Australian issuers after complying with local laws and regulations

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THE KANGAROO BONDS AND BLOCKCHAIN BOND-I’s
Kangaroo bonds or Matilda bonds are Australian dollar-denominated bonds issued by non-Australian
issuers after complying with local laws and regulations. They represent the largest share of the Australian
domestic bond market after Australian Government Securities (AGS) and semi-government securities
(semis) (Bergmann & Nitschke, 2018). The bond issuers are major banks and financial institutions of
high credit quality who participate in the Australian foreign exchange and derivative markets. The
experience of these firms in the Australian bond market also helps other countries develop their
domestic bond markets (Batten, Hogan & Szilagyi, 2008).
A company normally enters a foreign market to gain access to better interest rates. Kangaroo bonds
are normally issued when interest rates in Australia are low relative to the domestic rate of the foreign
corporation. This will help to lower the interest expense and cost of borrowing for the issuer. These
bonds, which are denominated in the local currency, form an attractive investment opportunity for investors who wish to diversify their portfolios past their local borders. In effect, they offer opportunities
to invest in foreign companies without having to manage the effects of currency exchange fluctuations
(‘Kangaroo Bond’, 2018).
The Kangaroo bond market is undergoing a transformation with the advent of bond-i by Commonwealth
Bank of Australia. CBA has taken steps to develop the world’s first blockchain bond with the support of
Northern Trust, QBE and Treasury Corporation of Victoria.
Once launched, the bond will operate on the blockchain platform maintained by World Bank and CBA
in Washington and Sydney (Rivera, 2018). Given the potential of this technology to simplify processes
for raising capital, improve operational efficiency and enhance regulatory oversight, this initiative is
predicted to be a positive development for bond markets.

Discussion points
• Discuss the opportunities presented by the Kangaroo bond market.
• Do you think the development of blockchain technology and the introduction of bond-i could
change the bond market for good?