Google bounds into the Kangaroo Market: ‘record breaking’ or ‘a sign of things to come’?

The most interesting thing about Google’s Kangaroo bond* isn’t the size of the deal. It’s what it says about the future of Australia’s credit market.

For years, offshore issuers have viewed Australia as a useful market for diversifying their funding sources. Today, it’s becoming something more than that.

The success of Google’s inaugural Kangaroo bond reinforces Australia’s growing role as a globally significant source of debt capital, supported by a deepening investor base, a stable market structure and increasing demand for high-quality credit exposure.

Today, Australia’s credit market is considered the third largest funding market in the world for large global issuers.

For Australian investors, that’s a positive development, especially in the context of attractive yields currently available across defensive assets.

Australian Corporate Credit Market

Largest AUD corporate credit deals (ex-Fins) over past 20 years

In this case, along with floating rate tranches, Google issued AA+ rated 5-year, 10-year and 20-year fixed rate tranches with yields of 5.55%, 6.26% and 6.98%, respectively.

Greater participation from global corporates means:

• More diversification opportunities
• Deepening market liquidity
• A broader opportunity set across sectors and maturities

Just a decade ago, a $1 billion corporate bond deal was considered enormous in Australia and maturities of 10 years or longer were rarities. Now, the market has absorbed five times that amount from a single issuer, with extremely strong investor appetite across the maturity spectrum out to 20 years. Google followed on from our major banks and the French government owned electricity utility company Électricité de France (EDF), all of whom have successfully issued 20-year bonds over the past 12 months.

Australia’s bond market is increasingly positioning itself as one of the places where sensible capital can be raised.

The opportunity for investors isn’t simply “owning AI”. It’s having access to high-quality issuers, across a range of maturities, with liquidity and yields that stack up favourably for savers and investors.

This transaction may be remembered less as a record-breaking deal and more as a signpost for where Australia’s corporate bond market is heading.

Annual corporate debt outstanding

*A Kangaroo bond is a market reference to an Australian dollar-denominated bond issued by a foreign domiciled company into the local Australian bond market using contracts under an Australian Law.

Managed Fund

Janus Henderson Australian Fixed Interest Fund

Australian Fixed Income

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