Australian Debt Securities and Corporate Bonds – February 2014

How to add Australian Debt Securities & Corporate Bonds to a portfolio. The fourth research report examining the Australian corporate bond market. In this report we place the Australian market in an international context and speculate on what the future holds for the asset class.

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National Australia Bank is committed to contributing to the development of the corporate bond market in Australia and believes education plays a critical role. Developing a deeper and more liquid corporate bond market in Australia will not only offer more diversity of choice to investors, but also broaden corporate funding sources and help companies facilitate their growth aspirations.

The Australian Centre for Financial Studies (ACFS) has released the fourth in a series of reports about the corporate bond market in Australia prepared for National Australia Bank.

In this final report we investigate recent developments in the Australian corporate bond market, place the Australian market in an international context and speculate on what the future holds for the asset class. We first consider recent regulatory changes and the trend toward increased flexibility and reduced cost for corporate debt issuers before exploring a number of arguments as to why a strong corporate debt market can be beneficial to the nation’s financial system.

The third section of this report benchmarks the Australian corporate bond market against other countries in the region and also considers the likelihood of continued reliance of Australian corporates on international debt markets rather than the domestic market.

The concluding sections of this report identify barriers that have played a role in impeding growth in the market to date and assesses how many of these barriers may be overcome in the future.

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The third report covers the important topic of accessing the fixed income market and the various methods investors can use to access debt securities and corporate bonds.

The second report in the series outlined the importance of understanding the different types of corporate bonds, the nature of risks involved and what levels of return is appropriate. Why do companies issue corporate bonds and how do the risks differ from company shares?

The first report in the series examined the importance of corporate bonds as an asset class for investors, and discussed the reasons they should be considered as part of a diversified investment portfolio:

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