Plan to boost local bond market

BLUE-CHIP companies would find it easier to sell "IOUs" to retail investors, under a government plan to boost the range of lower-risk assets available to investors.

BLUE-CHIP companies would find it easier to sell "IOUs" to retail investors, under a government plan to boost the range of lower-risk assets available to investors.

Federal Treasurer Wayne Swan will unveil plans today to bolster the domestic corporate bond market, which has long been neglected by many companies because of the expense of issuing debt to retail investors.

In a bid to cut some of the red tape that raises the cost of issuing bonds, a discussion paper released by Mr Swan will suggest the government allow companies to issue shorter prospectus documents when selling bonds. The paper will also propose watering down director liability laws, saying today's rules require extensive oversight of bond issues by directors, raising their cost.

Highly rated bonds which pay investors interest and are considered fairly secure have enjoyed a rise in popularity since the global financial crisis, helped by investors who are seeking greater safety.

The discussion paper also says a bigger bond market may allow investors to diversify into assets that provide a steady income stream before and during retirement.

Mr Swan will float the proposals at a meeting of regulators and market participants in Sydney.

"The government considers the development of a deeper and more liquid corporate bond market an important issue for the broader development of our financial sector and more importantly our economy," speaking notes for Mr Swan say. "This is increasingly important at a time when international debt markets are facing such difficult headwinds."

Analysts say the retail corporate bond market is underdeveloped because it is more expensive for companies than simply borrowing from banks or tapping wholesale markets.

But the chief executive of Australia Ratings, Chris Dalton, said there was growing demand for safer assets such as bonds.

"There's a lack of fixed income products available to investors, and I think the volatility in the equity markets over the past few years has caused people to rebalance their risk appetite."

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