Australia's government is proposing to simplify the sale of retail bonds in a move that could offer firms an alternative to bank funding and see a large increase in issuance. Among the new measures proposed by the Labour government, the most important one is to allow individual buyers to access nearly all the same securities as professional buyers through a listing on the stock exchange.
"That is absolutely fabulous... it has the potential to be a game changer," said Phil Bayley, an academic and debt capital market consultant at ADCM, recently. Unlike New Zealand, Switzerland or Japan, retail bond offers are rare in Australia where bonds are typically bought by professional investors.
However, since the global financial crisis hit, the Australian government has been promoting the nascent retail bond market as an alternative source of funding for companies. Efforts have been slowly paying off, with 2013 shaping up as a bumper year. East & Partners estimates as much as A$17 billion ($17.6 billion) could be raised by December. The bond listing initiative could see retail issuance soar to at least A$35 billion per year in the near-term, says ADCM's Bayley.