Australia Debt Market

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CHARLES STURT UNIVERSITY Student ID: 11514207 Student Name: Zoydulla Numanov Task: The Australian Corporate and Government debt market FIN 530 Assignement 2 Lecturer: Ruhina Karim 26.08.2013 * Executive summary The purpose of this report is to review corporate and government debt market of Australia. The report illustrates effect of GFC to Australian corporate and government debt markets and how Australia managed debt market during that period. The main finding are that Australian economy was not effected in that extend as rest of the world. Australian banks were concentrated in domestic market rather than investing offshore. Also government provided guaranty which supported debt market and saved it…show more content…
This way government can stop speculation with high risky debts and protect pension funds and retail investors. Lately, corporate debt market is short of supply. Investors, who are seeking for low risk and secured investment, do not have many options in terms of debt investment. Furthermore, debts are mostly sold through wholesale market rather than ASX. Retail investors have to invest to self-managed funds (trusts) in order to be able to invest to debt through wholesale. Table 1 clearly illustrates that only 0.7% of the self-managed super fund allocated to debt securities. Comparing to other fixed rate securities, corporate bonds vary rare as well. For example, there were only 5 issues with $400 million market capitalization, which is only 1.1% (see table 2) among ASX traded ones in November 2012 (O’Brien et al., 2012). High risky bonds should provide higher return according with the risk related to the company. Also bonds are less risky than equity issued by the same company as in case of insolvency of an organization debt holders paid first and only after shareholders. Table 3 clearly illustrates that yield return increases according to risk, where government bonds are equalized to free risk issues (Davis, 2012). Corporate bonds yield coupon rate might fluctuate depending on rating of the company that reflects risk of the company. Investors also can gain or lose by selling bond in secondary market.
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