January 7, 2013

Australian Corporate Bonds – January 2013

We bring you the first of five research reports examining the Australian Corporate Bond Market, prepared for National Australia Bank by the Australian Centre for Financial Studies.

NAB has a strong and long held view that Australia needs to further develop a corporate bond market in Australia. We need to fund Australia’s economic growth and we need to ensure our businesses can compete globally.

Whilst there is no quick fix solution to these challenges, developing a deeper and more liquid corporate bond market will broaden corporate funding sources and help facilitate their growth aspirations.

This will be a lengthy and detailed process. However NAB has been supporting businesses and opening up new markets for over 150 years, and we believe the next stage in the evolution is a well developed corporate bond market.

Facilitating funding to businesses via a corporate bond market will free up banks’ balance sheets to continue supporting SME’s.

A deeper corporate bond market will also provide a lower risk funding model for banks, with less reliance on off-shore funding, resulting in a system that would be less susceptible to offshore market closures and improved stability of economic growth.

A number of commentators have discussed the dominance of equities in asset allocation and have called for an increase in focus and attention towards fixed income. Ideally there should be an equal understanding of fixed income as currently exists with equities.

NAB is deeply committed to contributing to this debate and understands that education will play a critical role in developing this market. As a result have engaged the Australian Centre for Financial Studies (ACFS) to develop a series of reports about the bond market in Australia.

The first of these reports examines the importance of corporate bonds as an asset class for retail investors in Australia.

Materials such as these ACFS reports will provide a greater understanding of these investments and take us one step closer towards a deeper and more liquid corporate bond market.

Importantly, we also think it is important that industry, Government, issuers, investors, ASIC, ratings agencies, research houses, bond originators, trading houses and advisers work together to ensure the best outcome for Australian businesses and investors. We look forward to working with all stakeholders to meet this important objective.

To find out more download the full report