ASX taps brokers to push fed bonds

The listing of government bonds on the ASX is set to give retail investors direct access to the risk-free securities for the first time for nearly three decades. This means small investors will be able to buy and trade government securities, without having to go through a managed fund.

Negotiations between the ASX and Canberra's funding arm, the Australian Office of Financial Management, are reaching the key final stages for the listing of the bonds as market rules are being thrashed out and operational procedures finalised.

The move has been promised for years but has failed to get off the ground given the regulatory complexity involved.

However, it is expected to provide a crucial boost to retail stockbrokers who see the listing of government bonds as an important step in spurring the development of a deeper corporate bond market and providing the sector a fresh revenue stream.

For companies, the option of raising finance from debt is generally cheaper than equity capital.

The initiative was given fresh momentum two years ago when the Johnson report into developing Australia's financial markets, recommended government debt should be again be traded among retail investors.

However, the looming listing coincides with yields on Canberra's bond hitting record lows, mostly as offshore market volatility has prompted big global investors to rush the low-risk debt. An ASX spokesman said the exchange is targeting the end-of-year timetable for the quoting of retail Commonwealth Government Bonds on the exchange.

Mr Funke Kupper is expected to face questions about the listing of the Commonwealth government bonds when he fronts this week's Stockbrokers Association conference in Melbourne. Australia is just one of eight countries comfortably sitting within a "AAA" credit rating from two agencies. But this means at present levels long-term bonds are paying rates fractionally above the rate of inflation.

The large exposure to shares and property by Australian investors has been cited by a range superannuation experts including Jeremy Cooper, the architect of the government's super reforms, as leaving Australians financially exposed to market downturns.

The $7 billion-plus in hybrid shares sold by big name corporates in recent months, suggests there is clear demand for listed debt from retail investors.

Next financial year the AOFM is expected to sell about $35 billion in bonds, with some of this likely to be earmarked to retail investors. Of this, $26 billion will cover maturing bonds.