Aussie bonds rose sharply on...........>

AUSSIE BONDS: Aussie bonds rose sharply on Tuesday, weak data at the start of

the session sparking a bid. Futures started the session lower alongside UST's

which have been selling off in anticipation of an FOMC rate hike before bouncing

after several weak data points from Australia. The House Price Index fell 0.2%

on the month against expectations of a 0.5% rise, and NAB Business Conditions

fell to 12 from 21, Confidence fell to 6 from 9.

- 3-Year futures last up 0.5 ticks on the session but some 3 ticks off session

lows, last at 98.005. 10-Year futures last up 3.5 ticks and 4.75 ticks off

session lows, last 97.4575.

- The roll was active in both futures contracts, volume around 30% rolled ahead

of the last trading day on Friday 15 December. March contract still around 0.5

ticks lower than Dec, MNI soruces note some shorts could be liquidating rather

than rolling.

- Yields lower across the curve, some bull flattening seen. 3-/10-Year spread

last 3.3bp narrower.