gov't bonds to trade on asx

The below article from www.smh.com.au - discussing the possibility of having Australian government bonds listed on the ASX, giving retail investors easy access to them.

What are your thoughts, everyone?

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Bonds plan touted as a safe bet for investors
Jamie Freed
July 18, 2009

THE Australian Stock Exchange and the federal and state governments are hatching a plan to make it as easy for retail investors to invest in government bonds as stocks by this time next year.

The move would open a relatively untapped market that could be worth between $30 billion and $40 billion.

"We want to see whether we can expand the market for our bonds," said Neil Hyden, chief executive of the Australian Office of Financial Management, which issues the Federal Government's debt securities. A final decision was still to be taken, he said.

Government bonds are now traded primarily through the wholesale market, which is less transparent to retail investors than a trading platform like the ASX. And in the wholesale market the bonds typically trade in parcels of $10 million.

The general manager for new markets at the ASX, Ken Chapman, said he would expect retail transactions to average $50,000 if government bonds were traded on the exchange, either through a broker or online.

He said government bonds would be attractive to investors nearing retirement or already in retirement because of the security of the asset class.

And it would not be unreasonable to expect 10 per cent of self-managed superannuation - or between $30 billion and $40 billion - to be held eventually in government bonds through such a system, he said.

Mr Chapman said it was unlikely that all of Australia's government debt would be immediately accessible to retail investors through the ASX and the CHESS clearing and settlement system.

"I suspect we would have a very limited number across the yield curves," he said, naming three-, five- and 10-year bonds as the products most likely to be made available first to retail investors.

The wholesale bond market would remain in place, but the easy availability of government bonds to retail investors was likely to make corporate issuers consider quoting their debt securities on the ASX, he said.

At present only a handful of corporate bonds can be traded on the exchange.

Philip Carden, an investment manager at the fixed income fund Supervised Investments Australia, said the ASX listing of government debt could eliminate the less transparent wholesale market with time.

"I'd be delighted to see all of this debt listed on the ASX," he said. "I'd get perfect price transparency. When you buy a bond from an intermediary you don't know what price he has paid for it."

NSW Treasury Corp and Queensland Treasury Corp have already begun discussing listings of their bonds with the ASX.

The head of the Treasury Corp of Victoria, Bill Whitford, said his department had yet to be directly approached for discussions, but he saw advantages in being able to gain access to retail investors through the ASX.

"It certainly - for self-managed superannuation funds - gives them access to a risk-free asset class, so I think that is a positive."

The head of trading at CMC Markets, James Foulsham, said there was likely to be strong interest from retail investors if government bonds were made available through the ASX.

"With interest rates really low at the moment, people, if they can get access to higher rates of return on their money, certainly [will be interested]."