The outlook for Australian corporate bonds over the next few years could be promising as global rating agency Standards & Poor's said on Tuesday that bond growths would be experienced soon as the sector sets out to ramp up its presence in the financial market.

S&P Australia managing director John Bailey said that at present, non-bank corporate bonds constitute only of a maximum of six percent in overall long-term outstanding bonds, which he attributed to the readily available bank funding sources and the stringent investment regulations.

Such environment, according to S&P, discourages the accelerated expansion of corporate bonds whereas in the United States bond financing has largely surpassed the levels of bank lending for corporate source funding.

Mr Bailey said that amidst the ongoing credit crisis, regulatory reforms being imposed in the banking sector are weighing down on banks capability to issue loan services.

As a direct result, local bond financing is proving to be more price competitive while corporate finance managers were compelled to explore other ways that could re-channel source funding away from banks.

Mr Bailey said that corporate bonds offer a viable alternative for numerous companies as he stressed that "with a relatively subdued equity market, fund managers are increasingly considering replacing part of their equity portfolio with good-quality bonds."

S&P said that with an environment that enables growth possibilities, soon enough "we believe the bond market will be able to provide a larger share of the corporate finance market in Australia."