Finance for Business: An In-depth Report on the Australian Bond Market

This report provides an overview of the Australian bond market, examining both government and corporate bonds. It highlights that the Australian bond market functions similarly to other developed countries, with the government bond market considered highly secure and serving as a benchmark. The report details the trading of bonds on the Australian Securities Exchange (ASX), including Exchange-traded Treasury Bonds and Indexed Bonds, and discusses their characteristics and trading processes. Furthermore, the report analyzes the performance of Australian Government Bonds over a five-year period, noting a reduction in yields in 2020 and the maximum change between 2018 and 2019. The report also explores the non-government bond market, which is divided into Australian Financial Institutions, non-financial bonds, long-dated asset-backed securities, and dollar-dominated bonds, with a focus on wholesale investors. The analysis concludes by noting the narrowing spread of non-government bonds by the end of 2018. References from various sources support the analysis provided.

Running head: FINANCE FOR BUSINESS
FINANCE FOR BUSINESS
Name of Student
Name of University
Author’s Note

1FINANCE FOR BUSINESS
AUSTRALIAN BOND MARKET:
Australian bond market is same as other developed countries around the world. Like
other countries Australian bond market entertains trading both government bonds and corporate
bonds. Australian government bond market can be stated as highly secure marketplace. The
return of the government bond is considered to be the benchmark for the whole bond of the
country. Australian bond market, which is also known as Commonwealth Government
Securities, is being traded on Australian Securities Exchange (ASX). In the security market
Australian Bond are listed as Exchange-traded Treasury Bonds and Exchange-traded Treasury
Indexed Bonds. The exchange traded Treasury Bonds are debt securities that has immovable face
value. Australian government bonds usually pay interest at the current market interest rate in
every 6 months. Exchange-traded Treasury Indexed Bonds have an regulate face value. Based on
the Consumer Price Index the face value of Exchange-traded Treasury Indexed Bonds is being
adjusted. The interests of Exchange-traded Treasury Indexed Bonds are mainly paid quarterly.
The buying and selling process of Exchange-traded Treasury Bonds and Exchange-traded
Treasury Indexed Bonds can be done through Australian Securities Exchange. The bond can be
transferred through financial advisor, stockbroker or through online trading (Sousa 2015).

2FINANCE FOR BUSINESS
(AUSTRALIAN GOVERNMENT BOND FORECAST)
(Sourced by Author)
As per the five year analysis of Australian Government Bonds, it can be determined that
the yield of Australian Government Bond has reduced in 2020 by considerable means. The
market yield of Australian Government Bonds was at its peak in 2017, but it reduced gradually
in next two years. As per the analysis it can be determined that the maximum change Australian
Government Bond had seen was from 2018 to 2019 (Makin and Pearce 2016). During this year
the bond value has decreased by -95.4bp. The fall continues in 2019 and by the end of 2019 the
country’s government bond further dropped by -44.9bp.

3FINANCE FOR BUSINESS
In spite of having a well-established Government Bond market in Australia, the most
performing bond market of Australia is non-government bonds. The non-government bond
market or corporate bond market are mainly divided into four parts. They are as follows:
1. Australian Financial Institutions
2. Australian non-financial bond
3. Long-dated asset-backed securities
4. Australia’s dollar dominated bonds
All Australian corporate bonds are rated by most notable rating agency. The selling of
Australian non-government bonds are mainly dominated by wholesale investors. The opportunity
for limited or small investors is pretty big (Bergmann and Nitschke 2016). The minimum amount
on which the government bonds are traded is $500,000.

4FINANCE FOR BUSINESS
(AUSTRALIAN NON-GOVERNMENT BONDS)
(Sourced by Author)
After analyzing the above trend of the performance of Australian Non-government
Bonds, it can be stated that by the end of 2018, the spread of non-government bonds has
decreased by considerable means (Smales 2014). During 2019 the non-government bond market
of Australia has narrowed down their spread.

5FINANCE FOR BUSINESS
REFERENCE:
Bergmann, M. and Nitschke, A., 2016. The Kangaroo Bond Market. RBA Bulletin, September,
pp.47-52.
Makin, A.J. and Pearce, J., 2016. Fiscal consolidation and Australia's public debt. Australian
Journal of Public Administration, 75(4), pp.424-440.
Smales, L.A., 2014. Political uncertainty and financial market uncertainty in an Australian
context. Journal of International Financial Markets, Institutions and Money, 32, pp.415-435.
Sousa, R.M., 2015. Linking wealth and labour income with stock returns and government bond
yields. The European Journal of Finance, 21(10-11), pp.806-825.