How do I buy Australian Government Bonds within Canada?
January 11, 2010 6:11 AM Subscribe
How do I buy Australian Government Bonds within Canada?
I live in Toronto, Ontario and am thinking about buying Australian Government Bonds. What's the best way to do this? Can I buy them directly from the Australian government, or would a bond fund be a better idea? I'm looking to maximize yield and minimize taxes. Any help you can give me would be greatly appreciated. Thanks!
I live in Toronto, Ontario and am thinking about buying Australian Government Bonds. What's the best way to do this? Can I buy them directly from the Australian government, or would a bond fund be a better idea? I'm looking to maximize yield and minimize taxes. Any help you can give me would be greatly appreciated. Thanks!
Response by poster: smackfu, you're absolutely right about exchange rate fluctuations. If I buy these bonds, I'd be buying them with U.S. Dollars (forgot to mention that in my question). It would be a bet on the Australian Dollar v.s. The U.S. Dollar, with the bond coupon as a bit of a "hedge" against a sudden rebound in USD (as opposed to a straight forex trade). I already have Canadian dollar assets and am looking for other assets besides USD to diversify my CAD holdings.
I believe the U.S. dollar has further to fall v.s. both the Canadian dollar and the Australian dollar.
posted by Fuzzy Monster at 8:16 AM on January 11, 2010
I believe the U.S. dollar has further to fall v.s. both the Canadian dollar and the Australian dollar.
posted by Fuzzy Monster at 8:16 AM on January 11, 2010
Response by poster: Maybe I'd be better off with a dividend-yielding Australian currency ETF bought with U.S. dollars? Like, say, FXA?
Are there any U.S. ETFs that track Australian Government bonds?
posted by Fuzzy Monster at 8:34 AM on January 11, 2010
Are there any U.S. ETFs that track Australian Government bonds?
posted by Fuzzy Monster at 8:34 AM on January 11, 2010
It seems to be fairly difficult, at least according to this Kiplinger's article.
posted by bgrebs at 11:06 AM on January 11, 2010
posted by bgrebs at 11:06 AM on January 11, 2010
(Sorry, Fuzzy Monster, I gave you my standard response to "Wow, country X has rates of 10%, I want some of that".)
posted by smackfu at 11:15 AM on January 11, 2010
posted by smackfu at 11:15 AM on January 11, 2010
Are you looking for Aussie bonds denominated in USD, or in AUD (which you'll purchase with USD)? How much would you buy if you could?
A few investment places in the city could get them, but would be buying them off another company themselves. If you want USD denominated, then it's easier to purchase, AUD denominated are very difficult, since they can only be held with a few custodians. Expect to buy a lot in the latter case, otherwise most firms won't bother.
(Disclosure - another department in my firm sells foreign bonds to retail clients. They do not have Aussie bonds, and have had settlement issues with them in the past. If you wanted to buy enough (probably about US 10K and up), then they'd see what was out there.
posted by Chuckles McLaughy du Haha, the depressed clown at 2:25 PM on January 11, 2010
A few investment places in the city could get them, but would be buying them off another company themselves. If you want USD denominated, then it's easier to purchase, AUD denominated are very difficult, since they can only be held with a few custodians. Expect to buy a lot in the latter case, otherwise most firms won't bother.
(Disclosure - another department in my firm sells foreign bonds to retail clients. They do not have Aussie bonds, and have had settlement issues with them in the past. If you wanted to buy enough (probably about US 10K and up), then they'd see what was out there.
posted by Chuckles McLaughy du Haha, the depressed clown at 2:25 PM on January 11, 2010
An update: our bond department will be buying some form of Aussie bond, Mefi mail me for contact information.
posted by Chuckles McLaughy du Haha, the depressed clown at 8:19 AM on January 14, 2010
posted by Chuckles McLaughy du Haha, the depressed clown at 8:19 AM on January 14, 2010
Response by poster: Thanks for the input, everyone. Chuckles, thanks very much for your offer, but I think I'm going to go in a different direction, as I was thinking of buying AUD denominated bonds (with USD), and not that many.
Right now I'm thinking that the US might raise interest rates before Australia raises them again, which might tank any AUD currency play. I know so many folks who have been burned by currency moves I'm proceeding with extreme caution.
Thanks again, all.
posted by Fuzzy Monster at 11:02 AM on January 18, 2010
Right now I'm thinking that the US might raise interest rates before Australia raises them again, which might tank any AUD currency play. I know so many folks who have been burned by currency moves I'm proceeding with extreme caution.
Thanks again, all.
posted by Fuzzy Monster at 11:02 AM on January 18, 2010
This thread is closed to new comments.
Exchange rate between AU$ and CA$:
1/1/2009: 0.8453
1/1/2010: 0.9434
That's an 11% exchange rate change over a year. It could easily be more or less or go in the opposite direction. So you have an unknown gain/loss (the exchange rate fluctuations) that can easily dwarf the known gains (the bond rate). Your safe investment isn't actually safe at all.
(Unless you actually want to earn money and spend it in AU$. Then it's ok.)
posted by smackfu at 7:25 AM on January 11, 2010