Retail bond market needs insto support

The viability of a retail bond market may hinge on the ability of the institutional market to provide leadership and support, according to King & Wood Mallesons partner Shannon Finch.

Finch said the framework for the issuance and trading of depository interests in retail bonds had been hinted at in the latest Corporations amendment exposure draft, and she hoped the draft signaled a linking up of the wholesale and retail markets.

"If you could … link the wholesale market with the ASX platform so that bonds that are able to be traded in the wholesale market can also be traded separately if people want on the ASX, that would be tremendously powerful," she said.

This would be particularly so if seasoned bonds could be available on the ASX without removing them from the wholesale platform Ausclear, according to Finch.

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"If you could trade a similar beneficial interest on the ASX then you could bridge those two markets potentially," she said.

She said fears that retail investors would substantially increase market volatility had been overplayed, as volatility was less of an issue in fixed income markets.

"I think the volatility concerns are overplayed. There is probably more volatility coming from retail because they're potentially led more by sentiment, but sentiment tends to affect these instruments less and sentiment is often reflected also in institutional trading," she said.

Finch said the superannuation market was at a tipping point due to the increase in self-managed super funds and demand for a greater array of products.

She said although super funds could not respond quickly to the changing demand, the corporate market could "look at the pockets of demand that are opening up, and tailor to that".