What is a Kangaroo Bond?
Also known as a Matilda bond, a kangaroo bond is a bond issue in the Australian market by a non-Australian company.
How Does a Kangaroo Bond Work?
Let's say Company XYZ is headquartered in San Diego. It specializes in research and products designed to preserve the Great Barrier Reef. It wants to open a center in Sydney, so it sells $10 million in bonds to build a factory. Because Company XYZ feels that there will be considerable demand from Australian investors, it lists the bonds on the Australian markets. These bonds are kangaroo bonds.
Why Does a Kangaroo Bond Matter?
Kangaroo bonds may be issued by foreign parties, but they are subject to the securities regulations of Australia. Companies might issue kangaroo bonds to tap into interest in foreign markets, as was the case in our example, but they also might issue kangaroo bonds to diversify their currency exposure (the bonds are denominated in Australian dollars).
