Retail investors will now be able to buy $10,000 parcels of Australian government bonds on the Australian Securities Exchange, five years after the process began to make it possible.
ASX chief executive Elmer Funke Kupper launched the market yesterday, to go live today at 10.15am, although he made it clear he did not expect a rush as bond prices were looking much likelier to drop than rise.
"It's been a long time coming," he admitted, but said the ASX had an eye on the longer term and hoped the innovation would underpin a yet-to-develop retail market in corporate bonds.
The Australian government bond market, which was nearly paid out of existence during the Howard government, now stands at about $150 billion.
Mr Funke Kupper said the process had required collaboration with federal Treasury, the Australian Office of Financial Management, the Reserve Bank, the Australian Securities & Investments Commission and other organisations, as well as needing federal legislation to be amended.
At present, the smallest parcel of Australian government bonds that can readily change hands is worth $500,000.
Ken Chapman, the ASX executive who has had carriage of the new market in bonds, said the process to devise the new market had been going in earnest since 2008 and that "if you'd bought Australian government bonds at that time you'd have enjoyed total average returns of around 12 per cent per year since".
The launch had the support of Mark Johnson, author of the Johnson report on making Australia a financial services hub, who said the trade in government bonds would now be "overt and inclusive at the retail level".
He said he shared Mr Funke Kupper's expectation that the market in bonds would start out quietly but said the development was "of real significance and real importance" in widening the choice for Australia's retail investors.
"Now it's going to be up to the market to make the most of it," he said, adding that he too hoped it would be the first step in a bigger process that would lead to a retail market in corporate bonds.
Mr Funke Kupper told The Australian that in his previous role as chief executive of Tabcorp he had overseen a successful corporate bond raising at the bank bill rate plus 4.5 per cent and that "I wish I had bought more of them".
But he added that the amount of management time spent with lawyers and other advisers had made the process one he would prefer not to repeat.
"There was a prospectus of hundreds of pages," he said, making it clear he would be pushing for simpler prospectus documents wherever possible in any future bond raising in Australia.
