With the first financial system inquiry in more than 16 years set to get underway early next year, it is inevitable that one of the considerations of the inquiry will be the functioning of the corporate bond market. The depth and efficiency of the market has been considered by other inquiries and numerous committees of review in recent years, and has been generally found wanting.However, what most have failed to appreciate is that Australia has a deep and efficient corporate bond market, in which 30 per cent to 40 per cent of the total issuance in each year since the GFC has come from kangaroo issuers. These international bond issuers would not be using the domestic corporate bond market if it was not capable of meeting at least some of their term-debt funding needs.The obvious question is: why have Australian companies chosen not to use the market? Is it because institutional investors have little appetite for credit risk that falls into the triple B rating category or below, or is it because the companies believe this to be the case?The answer to the question does not matter because the market is now sorting this out for itself. This year has seen a relative rush of bond issuance by Australian companies and even corporate kangaroo issuers, who have found the market perfectly capable of meeting their term-debt funding needs. Moreover, the market provides essential diversification away from relying on banks and allows companies to lengthen their debt maturity profiles. When Telstra can raise five-year funds at credit spreads below those at which the major banks can issue, this means the trend can be expected to continue. In this context, it appears that the correct decision was made when regulatory efforts to improve the functioning of the corporate bond market were focused on developing a retail or, more precisely, a listed corporate bond market. The wholesale market is an over-the-counter market and is the domain of institutional and sophisticated investors. A listed market would be open to all players - mums and dads, sophisticated and institutional - just like the share market.Therefore, it can be expected that this latest inquiry will focus its attention on the development of the listed corporate bond market to date, and what further steps can be taken. The focus then must be on two key questions:1. Why has ASIC's short-form prospectus failed to generate low risk, senior corporate bond issuance, as seen in the wholesale market? 2. Why has the listed market developed as a risky, high yield market?