Kangaroo bonds are a type of bond that is issued by a foreign entity or firm, but are denominated in Australian dollars. The purpose of these bonds is to provide foreign companies with exposure to the Australian markets and allow them to raise funds in the different currency that is used in Australia.

These bonds offer Australian investors an attractive alternative to investments denominated in non-Aussie currencies. They are able to invest in the Australian market without experiencing currency risk. As a foreign firm, these bonds provide an opportunity to access a new market and further diversify their investor base.

Kangaroo bonds come with specific advantages as well as risks. For instance, interest payments on these bonds are generally higher than comparable bonds denominated in foreign currency. However, fx rate fluctuations can create additional costs that can offset the higher interest rate.

Kangaroo bonds can be issued either as a fixed or floating-rate bond, so it is important for investors to carefully understand the terms of the bond before investing. Individuals who purchase foreign bonds should be aware that there may be a lack of liquidity for such bonds and the creditworthiness of the issuer should be taken into account.

Overall, these bonds present an attractive investment for Australian investors, as it allows for them to access the market without being exposed to currency risks. Therefore, kangaroo bonds can be a valuable tool for foreign companies to access new markets and for domestic investors to gain exposure to new investments. It is important that investors thoroughly research the issuer and understand the terms of the bond before investing in the kangaroo bond market.