Canada gets behind the kangaroo
The kangaroo market has made an abrupt leap forward. The value of Australian dollar-denominated bonds launched by offshore issuers hit AU$61 billion in 2024, a rise of 134% in three years.
Canada was the source of a big proportion of that increase, notes RBC Capital Markets’ Alex Caridia: “Last year, 40% of issuance came from Canadian-domiciled issuers, which is a 25% increase versus the year before.”
Ontario is among the longest-established kangaroo issuers, though for much of the past decade has only executed issues overaging $53 million due to lack of demand. However, the success of CPP Investments’ transactions in the market since its 2022 debut has caught the attention of Ontario and other provinces, says Carlos Yep of the Ontario Financing Authority.
“We figured that we have to try, and we did – and it was amazing to see so many provinces, and the supply being digested in such a short time,” he says. “The demand is such that we’d like to come back again – I think it’s a very viable market.”
While the Canadian issuers have all issued 10-year tenor deals, five-year tenors are most common for kangaroo issuance. Yep hopes to make a seven-year point work in future, to further boost liquidity and make it easier to compare relative value.
“Last year, 40% of kangaroo issuance came from Canadian-domiciled issuers, a 25% increase versus the year before.”
Alex Caridia, MD and Head of Public Sector Markets, RBC Capital Markets
Australian states take a global perspective
Australian state issuers are also comfortable with the new surge of issuance, according to Paul Kelly of the Treasury Corporation of Victoria (TCV). He points out that Australian states themselves issued over AU$100 billion last year.
“We’re looking to have the capacity to build out a 20-year liquid curve, so I think there’s plenty of capacity for established issuers and newer issuers to coexist,” Kelly says.
TCV now considers itself a global issuer, with offshore investment making up around a quarter of its total in recent years, and over half in 2025 to date. Kelly is heartened by the proportion of both kangaroo and semi-government debt that now goes abroad.
“It tells me there’s still ample capacity for us to issue in Aussie. It tells me that we as traditional issuers are not getting crowded out of this space,” he says. “But it also tells me that we need to keep thinking globally.”
Victoria is keeping an eye on Queensland’s recent euro-denominated benchmark deal, with a view to emulating it. “We can pull the trigger on these trades pretty quickly,” Kelly says. “Hopefully some really positive signs will come out of the Queensland trade, and it really does pave the way for the rest of us to continue this global approach to our fairly elevated funding tasks.”
TCV’s current investor relations efforts are targeting central banks and hedge funds, Kelly says – the latter made up 50% of the allocation in the state’s last three trades.
“There’s still ample capacity for us to issue in Aussie.”
Paul Kelly, Head of Markets, Treasury Corporation of Victoria
Strong performance and positive signs
RBC Capital Markets’ Director of Interest Rate Trading, Jeff Johnson, says liquidity in the Australian market is excellent, if challenged by current volatility, with 2025 off to a strong start, especially in the SSA (sovereign, supranational and agency) space.
He has also noted a trend for more issuers to track turnover. “Semi-government issuers track turnover, so dealers get marked on their scores for how much they are actually trading,” he explains. “Some of the SSAs have started to follow suit and track that turnover as well. I think it’s a good thing, and it also does keep the curves more honest.”
The widening of swap spreads since the Covid-19 pandemic provided an opportunity for offshore investors to enjoy good performance with SSAs. Now that swap spreads are moving into negative territory, however, SSAs are struggling to keep up, Johnson notes.
“What we’ve seen is a shift preference out of SSAs and into the semi-government market, which has been really good for liquidity and a welcome RV play,” he says. “It’s quite positive for the semi market, where those steeper curves are incentivizing offshore investors to enter the sector.”
“What we’ve seen is a shift preference out of SSAs and into the semi-government market, which has been really good for liquidity and a welcome RV play.”
Jeff Johnson, Director, Interest Rate Trading, RBC Capital Markets