"Green shoots" take root in Aussie private bonds

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By Cecile Lefort

SYDNEY, May 12 (Reuters) - Australia's non-government bond
market is showing its own "green shoots" of recovery with a
trickle of new issues, and bankers expect more to come amid a
new-found confidence in the health of the global economy.

A government guarantee of bank bonds introduced late last
year had kept issuance from lenders ticking over, but strong
demand for recent issues without a guarantee has sparked
optimism that aversion to risky assets might finally be on the
wane.

In the past month, Australian borrowers have raised over
A$5 billion ($4 billion) in kangaroo, corporate and
non-guaranteed bank bonds. That compares to A$8 billion in the
previous six months. Nearly 90 percent of the A$27 billion
worth of domestic bonds sold in the first quarter carried the
government guarantee.

"There has been a real shift in sentiment, reflected in the
equity markets and similarly on the debt issuance front," said
Michael Bush, head of credit research at National Australia
Bank (NAB).

"The issuance pace is going to click along at a healthy
pace and we may see more non-financial borrowers going into the
third quarter."

Gaming group Tabcorp Holdings (TAH.AX) has been the only
non-financial issuer so far this year, and the only one since
2007.

Banks are still likely to lead the way though, with three
of the top four -- Australia & New Zealand Banking Group
(ANZ.AX), Commonwealth Bank of Australia (CBA.AX) and National
Australia Bank (NAB.AX) -- having raised A$3.7 billion in bonds
without the state guarantee in the past month.

Westpac Banking Corp (WBC.AX), the only one yet to raise
funds without the guarantee, has flagged its intention to do
so.

"I think its in all of our interest to start the process of
gradually moving away from the use of the government guarantee.
You can fully expect that we will also," Chief Executive
Officer Gail Kelly told reporters last week.

NAB's Bush said government actions across the globe to
boost economies had had a positive impact on confidence, and
that was partly behind a recovery in the number of foreign
entities borrowing in Australian dollars after an eight-month
drought.

These kangaroo borrowers -- foreign issuers that sell
Australian dollar bonds in Australia -- raised A$1.3 billion
and bankers expect more to come.

Chad Karpes, head of Australian bond syndication at Royal
Bank of Scotland, expects further kangaroo issuance over the
next month, but noted potential competition from another type
of bonds: semi-governments, or bonds issued by Australia's
states.

"There is certainly a window of opportunity now, which may
potentially close upon the Australian semi-governments
returning to market, expected late June or early July," he
said.

Sales of kangaroo bonds had been crimped by the guarantee
provided to banks, making returns unattractive for investors.
But in late March Australia extended the guarantee to the
states, which could make semi-government issues a bigger draw.

But what would really give a boost to the market, bankers
say, would be an issue by a non-financial firm.

"The watershed would be to see a proper corporate name come
with a deal which came in size and at good pricing," said Simon
Ling, executive director and head of hybrid and debt markets at
Westpac Institutional Bank.

"That would be the sort of measure of the market reopening
in a proper way."
($1=1.323 Australian Dollar)
(Editing by Jonathan Standing)