
Kangaroo Bond
A kangaroo bond is a type of foreign bond issued in the Australian market by non-Australian firms and is denominated in Australian currency. Other foreign bonds include Samurai bonds, Maple bonds, Matador bonds, Yankee bonds, and Bulldog bonds. A kangaroo bond is a type of foreign bond issued in the Australian market by non-Australian firms and is denominated in Australian currency. The benefit of kangaroo bonds to Australian investors is that they are not subject to currency risks that they would be if purchasing the same bonds in a foreign currency. When a company decides to tap into a foreign market, it can do so by issuing foreign bonds, which are bonds denominated in the currency of the intended market.

What Is a Kangaroo Bond?
A kangaroo bond is a type of foreign bond issued in the Australian market by non-Australian firms and is denominated in Australian currency. The bond is subject to the securities regulations of Australia. A kangaroo bond is also known as a "matilda bond."




How a Kangaroo Bond Works
Bond issuers that want access to investors and lenders in the Australian debt market would issue a bond referred to as a kangaroo bond, named in recognition of the country’s national animal emblem. A kangaroo bond is a foreign bond issued in Australian dollars by non-domestic entities, including corporations, financial institutions, and governments.
Simply put, a foreign bond is issued in a domestic market by a foreign issuer in the currency of the domestic country. Foreign bonds are mainly used to provide issuers with access to another capital market outside of their own to raise capital.
Major corporations and/or investment firms looking to diversify their holdings and improve their overall currency exposures can use kangaroo bonds to raise funds in Australian dollars. Kangaroo bonds are typically issued when interest rates in Australia are low relative to the foreign corporation's domestic rates, thus, lowering the foreign issuer's overall interest expense and cost of borrowing.
Benefits of a Kangaroo Bond
A company may choose to enter a foreign market if it believes that it would get attractive interest rates in this market or if it has a need for foreign currency. When a company decides to tap into a foreign market, it can do so by issuing foreign bonds, which are bonds denominated in the currency of the intended market.
A kangaroo bond is an attractive investment venture for domestic investors who are not exposed to currency risk since the bonds are denominated in their local currency. Furthermore, investors who wish to diversify their portfolios beyond their local borders may opt for these bonds and earn incremental yield. In effect, kangaroo bonds provide an opportunity to invest in foreign companies without having to manage the effects of currency exchange fluctuations.
Many issuers do not necessarily have a need for Australian dollars when they issue kangaroo bonds. Proceeds from the sale of the bonds are typically converted back to a currency that the issuer requires through financial instruments such as cross-currency swaps.
These swaps are used to hedge the foreign exchange risk associated with the issuer’s obligation to pay coupons and repay the principal in Australian dollars. For example, through a cross-currency swap, a kangaroo bond issuer can lend Australian dollars at the bank bill swap rate (BBSW) plus the basis, while paying the fed funds rate plus some margin for U.S. dollars.
The risk associated with raising capital in a foreign currency can often be mitigated with risk-management techniques such as cross-currency swaps.
Example of a Kangaroo Bond
In January 2018, Emirates NBD, Dubai’s largest bank, priced a A$450 million ($362.03 million) 10-year bond, part of a A$1.5 billion kangaroo bond program, with a 4.75 percent indicative annual coupon. The reason for the bond issuance was to diversify the bank’s source of funding and to facilitate its expansion into new markets.
Major issuers of kangaroo bonds have typically been from the United States and Germany. Other foreign bonds include Samurai bonds, Maple bonds, Matador bonds, Yankee bonds, and Bulldog bonds.
Related terms:
Bank Bill Swap Rate (BBSW)
The Bank Bill Swap Rate (BBSW) is a short-term interest rate used as a benchmark for the pricing of Australian dollar derivatives and securities. read more
Bulldog Bond
Bulldog bond is a bond, traded in the United Kingdom, that is purchased by buyers interested in earning a revenue stream from the British pound. read more
Capital Markets
Capital markets are venues where savings and investments are channeled between suppliers and those in need of capital. read more
Cost of Debt & How to Calculate
Cost of debt is the effective rate that a company pays on its current debt as part of its capital structure. read more
Coupon
A coupon is the annual interest rate paid on a bond, expressed as a percentage of the face value, also referred to as the "coupon rate." read more
Cross-Currency Swap and Example
A cross-currency swap is an agreement between two parties to exchange interest payments and principal denominated in two different currencies. These types of swaps are often utilized by large companies with international operations. read more
Dollar Bond
A dollar bond is a U.S. denominated bond that trades outside of the U.S. and both the principal and any coupon payments are paid in U.S. dollars. read more
Euroyen Bond
Euroyen bond is a debt security issued by a non-Japanese company outside of Japan to attract non-Japanese investors who seek exposure to the yen. read more
Federal Funds Rate
The federal funds rate is the target interest rate set by the Fed at which commercial banks borrow and lend their excess reserves to each other overnight. read more
Fixed Income & Examples
Fixed income refers to assets and securities that bear fixed cash flows for investors, such as fixed rate interest or dividends. read more