Definition
The term kangaroo bond refers to an indenture issued in Australia, in Australian dollars, by a foreign bank or corporation. Kangaroo bonds are issued when a corporation wishes to raise capital from investors located in Australia.
Explanation
Foreign corporations that wish to raise funds in Australia have the option of issuing what are known as kangaroo bonds. These bonds are sold by non-domestic entities, including corporations, financial institutions and governments, and are issued in Australian dollars. This is typically done when the interest rates in Australia are low relative to the foreign corporation's domestic rates, which lowers their overall interest expense.
Since the bond is issued in Australia's domestic currency, investors located in Australia are also insulated from currency exchange rate risk. Foreign companies will typically issue these securities if they have plans to establish operations in Australia. These bonds are also attractive to investors wishing to geographically diversify their portfolios.
The kangaroo is an unofficial symbol of Australia. In addition to appearing on Australia's coat of arms, it also appears on several of its currency.
Related Terms
- The term yankee bond refers to an indenture issued in the United States, in U.S. dollars, by a foreign bank or corporation. Yankee bonds are issued when a foreign corporation wishes to raise capital from investors located in the United States.
Moneyzine EditorSeptember 21st, 2023 - The term speculative-grade bond is used to describe securities deemed to not be of investment quality by a credit rating agency. Since the risk of default is higher with speculative grade bonds, investors will demand they pay a higher rate of interest too.Moneyzine EditorSeptember 21st, 2023
- The term payment-in-kind bond refers to a security that provides the issuer with the option of paying the holder with additional bonds rather than cash. Payment-in-kind bonds are oftentimes issued by corporations experiencing financial distress.Moneyzine EditorSeptember 20th, 2023
The term Eurodollar bond refers to any security issued in United States dollars by a bank or corporation located outside of the United States. Eurodollar bonds are issued when a corporation wishes to raise capital from investors located in foreign countries.Moneyzine EditorJanuary 17th, 2024
