News Service from House Harris

Aust bonds close flat to firmer on Citi news

SYDNEY, Nov 24 AAP - The Australian bond market closed flat to firmer asworries about US banking giant Citigroup boosted longer-dated bonds.

The front end of the curve was virtually flat because of a public holiday in Japan thinning out trading volumes.

At 1630 AEDT, the yield on the Commonwealth Government March 2019 bond was at 4.595 per cent, down from Friday's close of 4.625 per cent, while the yield on the June 2011 bond was at 3.500 per cent, down marginally from 3.515per cent.

On the Sydney Futures Exchange, the December 10-year bond futures contract price was at 95.385, up from Friday's close of 95.370, while the December three-year contract price was the same as Friday's 96.470.

The Australian bond market opened weaker on Monday as financial markets reacted to news US president-elect Barack Obama had appointed Federal Reserve Bank of New York president Timothy Geithner as the next Treasury Secretary.

By the end of the local session, bond markets were more concerned about thefuture of Citigroup, sparking a mild back end rally.

US news reports said the US government would cover Citigroup's losses, following a 50 per cent decline in its stock value last week which led to speculation the company would merge or be sold.

TD Securities senior strategist Joshua Williamson said 10-year Australian bonds rallied marginally as the Citigroup turmoil took centre stage over earlier news about Mr Geithner's appointment and Obama's plan for aUS800 billion ($A1.26 trillion) stimulus package.

"People are more concerned about Citigroup," Mr Williamson said.

"The announcement that Obama was making (Geithner) Treasury Secretary ... hasn't impacted the market."

At the front end of the curve, three-year yields were flat for most of the late afternoon, with Japanese markets closed for a public holiday.

"The moves at the front end could be explained by the lack of liquidity," Mr Williamson said.

Bond markets are likely to trade light until the release on Thursday of Australian capital expenditure data for the September quarter.

SECURITY YIELD PREVIOUS CLOSE

CGS 5.25 pct Mar 2019 4.595 4.625

CGS 5.75 pct Jun 2011 3.500 3.515

90-day bank bill rate 4.450 4.400

180-day bank bill rate 3.960 3.887

Sydney Futures Exchange

CONTRACT PRICE PREVIOUS CLOSE

Dec 2008 10-yr bond futures 95.385 95.370

Dec 2008 3-yr bond futures 96.470 96.470

Dec 2008 bill futures 95.850 95.900

Mar 2009 bill futures 96.900 96.920