Reuters) – Global investors are fueling an increase in the issuance of kangaroo bonds, making Australia looking for an alternative to a record-low yields – especially after the shock of the vote from Britain to leave the European Union.
Kangaroo issuance of additional bonds of $ 7.2 billion in the second quarter of 2016 was 22 percent higher during the year and the largest in the last five quarters volume, according to Thomson Reuters.
Apple (O: AAPL) and Coca-Cola Co (N: KO) are among the largest corporate borrowers in this market, issuance of A $ 1.425 billion and A $ 1 billion in bonds Kangaroo bonds are issued respectively.Kangaroo by issuers no Australians in the Australian market and are denominated in Australian dollars. They offer discounted rates and yields that bonds the Australian government.
The total value of bonds in circulation kangaroo was A $ 160 million to Wednesday, according to Thomson Reuters. That compares with $ 430 million Australian government bonds outstanding and A $ 247 million state government bonds.
The increase in the issuance of kangaroo bonds comes at a time when bond yields in the United States, Japan, Germany, France and the UK have hit record lows, which is expected to persist as investors bet on the possibility for more stimulus from Brexit official.
“Investors, investors particularly globally, continue to search for yield. So we will see continued interest, especially around the part of 10 years of the curve SSAs (supranational issuers sovereign and agency kangaroo bonds), “he said Andrew Ticehurst, Australia rates Sydney-based strategy for Nomura.
The largest issuers of kangaroo bonds are supranational, such International Bank for Reconstruction and Development and the Asian Development Bank institutions. Although it costs the borrower’s debt in US dollars, kangaroo bonds are popular because they offer diversification.
Kangaroo bond issuance has also been helped by increased swap spreads Australian-dollar basis, the issuer would receive in a transaction currency trading, while coverage of the Australian dollar debt. The base 10-year Australian dollar swap spread <AUDCBS10Y => stood at 24.5 basis points on Wednesday, the highest in almost a year.
. “The cost of issuing bonds kangaroo is much more attractive is cheaper for borrowers to issue them,” said Ken Crompton, fixed income analyst based in Sydney at Deutsche Bank (DE: DBKGn).
Some analysts said demand for kangaroo bonds has also contributed to the recent appreciation of the Australian dollar against the US dollar – A trend that is expected to continue.
The Australian dollar has appreciated by more than 9 percent against the US dollar during the last six months.
“The Australian dollar continues to trade slightly higher prices of raw materials and interest rate differentials might suggest is just because of this demand for kangaroo bonds,” Nomura said Ticehurst.