Aussie 10-yr bond futures strike fresh 9-week peak

SYDNEY, Aug 22 (Reuters) - Australian 10-year bond futures rose to fresh nine-week highs on Tuesday, after yields on U.S. Treasuries fell to their lowest level in nearly five months due to investors switching to the safer haven of bonds.

Australian September 10-year bond futures were 1.5 basis points higher at 94.290, with the implied yield easing to 5.71 percent, having touched a high of 94.290 in the night session. The contract set a 26-month low of 94.045 a week ago.

"The U.S. bond market rallied solidly throughout the day (Monday) on the back of the equity market weakness and Middle East tensions," said Citigroup economist Shane Lee.

Analysts said despite the risk of higher Australian interest rates later this year, the local market has been benefiting from the risk that the Federal Reserve may have finished it tightening cycle, lifting the market through stubborn resistance on Monday and accelerating the advance.

Still, the short-end of the market has been less buoyant in anticipation the Reserve Bank of Australia will follow-up this year's rate rises with a third in November or December.

Analysts said much will depend on the inflation readings for the third quarter in October as to whether the central bank will lift the cash rate to 6.25 percent from 6 percent.

The local data flow this week, however, is fairly thin, although Thursday's third-quarter house price index will be of interest to analysts.

July merchandise imports and new motor vehicle sales are due at 11:30 a.m. (0130 GMT).

Oil prices rose more than $1 a barrel as Iran, the world's fourth-largest oil exporter, said it would press ahead with its nuclear programme, rejecting an incentive plan from the United States, Russia, China. France, Britain and Germany.

"Iran's rejection of the incentive plan has generated a slight safety bid in U.S. Treasuries, and put upward pressure on oil prices," said ANZ economist Sean Comber.

 "There is an expectation that sabre rattling will continue
ahead of the Aug. 31 deadline, and volatility in markets is
likely to be heightened." --------------(Snapshot at 10:00
a.m./0000 GMT)---------------- FUTURES

      CASH YIELD      90-DAY BILL (SEP) 93.80 ( UNCH
) 6.17 (6.17) 3-YR BOND   (SEP)
94.170(+0.010)  5.85 (5.85) 10-YR BOND  (SEP)
94.290(+0.015) 5.71 (5.73) 3/10 SPREAD  -12.0
(-11.5)     AUST/US 10-YR SPREAD +89  (+90 ) AUD/USD
0.7617 (0.7594) US 10-YR 4.82 (4.83)
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