Australian government bonds will be traded on the Australian Securities Exchange from May 21.
The new arrangement will allow investments in Treasury Bonds and Treasury Indexed Bonds in the form of CHESS Depository Interests (CDIs).
These new instruments will be called Exchange-traded Treasury Bonds (eTBs) and Exchange-traded Treasury Indexed Bonds (eTIBs).
They will be traded in the same way as shares listed on the ASX.
The Australian Office of Financial Management, which manages government debt, said the move was part of a package of measures announced in 2010 to promote "a competitive and sustainable banking system". It said: "These measures included assisting the development of a deep and liquid corporate bond market.
"One way this can be achieved is by launching the trading of Australian government bonds on a securities exchange."
The AOFM said the move would give retail investors a better guide to pricing of corporate bonds and encourage them to diversify their investments.