Commonwealth Bank of Australia (CBA), being a sole manager of the deal, states in a statement that the two-year bonds are pricing to yield 2.251 percent with a settlement on 28th August.
This prototype deal named as “Bondi” is likely the initial move to separate bond sales away from manual processes, making the automation quicker and cheaper. Bondi stands for Blockchain Operated New Debt Instrument.
The World Bank routinely uses the borrowing power for developing new bond markets and pioneering elegant means to sell, trade the securities. It issues within USD 50 – 60 billion yearly bonds to back the economic progress to develop the countries.
This blockchain push by banks took place when the Australian Securities Exchange planned to switch their use to distributed ledger i.e. blockchain technology. According to Reuters, this was under the plan to clear and settle equities trades cutting costs from 2020.
The executive general manager at CBA, James Wall states in an interview held earlier this month
You’re collapsing a traditional bond issuance from a manual bookbuild process and allocation process, an extended settlement then a registrar and a custodian, into something that could happen online instantaneously.
The World Bank through International Bank for Reconstruction and Development, which remains its funding arm, rated Aaa/AAA, raising an A$100 million ($73.16 million) from the initial public offering of a blockchain bond.
Australia has always been a popular test site incorporating market developments due to its well-known financial infrastructure. Additionally, it is also familiar about its international investors with the Australian dollar, the most trading currency.
CBA has set the price for this kangaroo deal on the bases of 23 points above benchmark rates. Kangaroo bonds are the bonds appearing in Australian dollars issuance by foreign institutions.
For the first time, the legal bond is created, transferred, allocated, and maintained via its life cycle solely utilizing its distributed ledger technology.
This new bond entirely does not welcome blockchain technology, however, as payments will still accomplish via the existing SWIFT system. This will avoid 10% Australian goods/services tax on fiat-currency-connecting tokens.