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Definition: Kangaroo Bond
Kangaroo Bond is a category of foreign bond which is issued by foreign or non-Australian corporations in the Australian market. These bonds come under Australian regulations and laws and are denominated in Australian currency. It is also called as Matilda bond.
Foreign bonds including kangaroo bonds, are chiefly used to provide bond issuers with access to additional capital market outside of their own markets to raise capital. Also, kangaroo bonds are used by major corporations and/or investment firms interested in diversifying their holdings and improving their overall currency exposures by raising funds in Australian dollars. Majority of issuers of kangaroo bonds have been usually from the United States, Germany. Other similar foreign bonds are samurai bonds, yankee bonds and bulldog bonds. Kangaroo bond issues have conformed closely to Australian bond deal size and maturities. There has, nevertheless, been some differentiation, and there will be more in the forthcoming years as the market develops. Kangaroo bond’s credit quality, as compared to that of local private issuers, has been comparatively high, but this is not an issue. It just reflects the nature of internal and foreign demand and comparative benefit in currency issuance.
For example, Let's say Company ABC is headquartered in San Francisco. It is into research and development of products designed to preserve the Great Barrier Reef. It is interested to open a subsidiary in Sydney, so it issues $20 million in bonds to build a plant. Because Company ABC believes that there will be substantial demand from Australian investors, it issues the bonds on the Australian markets. These bonds will be called kangaroo bonds.