Question

In Australia, the Federal and State governments can raise funds by issuing bonds. Please list the...

In Australia, the Federal and State governments can raise funds by issuing bonds. Please list the major investors in these bonds and why they invest these bond.

Homework Answers

Answer #1

A Australian government bond or sovereign bond can be issued by government to pay a periodic interest payments in form of coupon rate and  repayment of the face value of the bond at end of the bond term. The measure purpose of these bonds are to support spending and planned capital expenditure.

List of investors in such bonds are:

  • Banks
  • Financial Institutions
  • Mutual fund house
  • ETF
  • retail investor by indirect method

Benefits of Buying such bonds:

  • Low risk - Low chance of default by government
  • Regular and continuous income - interest paid on either quarterly or half-yearly basis
  • Easy to buy and sell - buy and sell anytime the Australian stock exchange
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