‘Bondi’ bonds priced in step from manual process to blockchain
● The World Bank has priced the world’s first public bond created and managed using only blockchain in a A$100m (R1.03bn) deal designed to test how the technology might improve bond sales practices.
Commonwealth Bank of Australia (CBA), the sole manager of the deal, said the twoyear bonds had been priced to yield 2.251% and would settle on August 28.
The prototype deal, dubbed a “Bondi” bond — standing for Blockchain Operated New Debt Instrument as well as a reference to Australia’s most famous beach — is being viewed as an initial step in moving bond sales away from manual processes towards faster and cheaper automation.
“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,” James Wall, executive general manager at CBA, said this month.
The World Bank, whose bonds carry an AAA rating, regularly uses its borrowing power to help develop new bond markets and pioneer new means for selling and trading the securities.
It issues between $50bn and $60bn (R712bn and R855bn) a year of bonds to back economic progress in developing countries.
Australia is a popular test site for market developments because of its well-established financial infrastructure and the familiarity of international investors with the Australian dollar, one of the most-traded currencies in the world.
Earlier this year, Russia’s MTS, a telecoms operator, and Sberbank claimed a worldfirst blockchain bond. The deal, for 750m roubles (R158m) of 182-day paper, was, however, privately placed.
While there have been other prototypes or parallel simulation blockchain projects in the market before, CBA said the World Bank bond will be the first time that capital is raised from public investors through a legally valid bond issuance that uses blockchain from start to finish.
CBA set the price for the “kangaroo” deal at 23 basis points above benchmark rates. Kangaroo bonds are bonds issued in Australian dollars by foreign institutions.