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Australian bonds

finish volatile

session mixed

SYDNEY: Australian bonds ended a volatile day mixed with only the long end able to hold onto some of the market's early gains, traders said.

An upward revision to the Australian Treasury's 1995/96 funding requirement combined with a softer tone in US bonds in Tokyo saw prices knocked back from an early advance.

The September 10-year bond futures contract ended a net two basis points higher at 90.885 after failing to breach resistance at 91.000. The cash 10-year bond yield ended at 9.06 percent having briefly dipped below 9.0 percent for the second time within a week.

The Treasury said it had revised its borrowing programme to an estimated A$8.5 billion from A$6.2 billion at the time of the May budget, and that Treasury bond issuance is now put at A$5.0 to A$6.0 billion against a budget A$3.0-4.0 billion forecast.

The Treasury said the increase in the borrowing programme did not reflect any amendment to the A$0.7 billion surplus estimated for 1995/96 at the budget.

The increase in bond selling will be used to handle the July 1996 bond expiry and will allow an equivalent reduction in the 1996/97 bond selling task, it added.

The first 1995/96 bond tender is planned for before end August followed by a second by mid-September, with subsequent bond tenders every four to six weeks.

Tenders will now be held on a Tuesday rather than a Wednesday with details announced on Monday.

With only two Tuesday's left before the end of the month, and the second falling on the July balance of payments release, the first bond tender could be next week, traders said.

An insight into the balance of payments will be revealed on Thursday with the release of July local imports, which are forecast on average to fall 0.7 percent after a 1.5 percent drop in June, according to a Reuter survey of economist. However, estimates ranged from a 4.0 percent fall to a five percent rise.

A rise of that magnitude would quickly bring concerns over the current account deficit back to the fore and put the short-end and the local dollar under pressure, traders said.

Other data due on Thursday includes July housing finance and second quarter company profits.-Reuter