* Travel stocks boosted by A$1.2 bln tourism support package
* Flight Centre Travel settles at highest since March 2020
* Bond market sell-off keeping equity market nervous -analyst
* Afterpay among top losers, sheds 3.7% after Wednesday's jump (Updates to close)
By Rashmi Ashok
March 11 (Reuters) - Australian shares surrendered early gains to close flat on Thursday, as a rally in tourism stocks that was fuelled by a new support package for the battered sector countered losses in big banks and buy-now-pay-later giant Afterpay.
The S&P/ASX 200 index .AXJO settled at 6,713.90 after rising as much as 0.6% earlier in the day, repeating a trend that saw early momentum fizzling by midday so far this week.
"The pace of sell-offs in the bond market has caught the equity market off guard. Bond yields are stabilising now but it's still keeping markets somewhat on edge, particularly after a strong run in recent months," said Steven Daghlian, a market analyst at CommSec.
"Overall, markets are doing okay, if you take a step back from the noise," he said, noting that the ASX200 index was about 7% away from the all-time high scaled in February last year.
Expectations of a swift economic recovery and higher inflation have led to a global bond rout, although yields have stabilised recently after central banks stepped in to quell talks about possible early interest rate hikes.
Tourism stocks gained the most in Australia after the government unveiled a A$1.2 billion ($928 million) tourism support package aimed at boosting local travel. Centre Travel Group FLT.AX was the top gainer, adding 9.2% to close at its highest since March 11, 2020. Corporate Travel Management CTD.AX rose 4.3%, while travel bookings company Webjet WEB.AX climbed 3.8%.
Casino and gaming company Aristocrat Leisure ALL.AX , Qantas Airways QAN.AX and Sydney Airport Holdings SYD.AX all clocked gains of more than 2%.
Losses among heavyweight stocks, however, weighed on the index. Afterpay APT.AX slumped nearly 4% after Wednesday's 7.5% jump, while the "Big Four" banks also ended lower.
New Zealand's S&P/NZX 50 index .NZ50 rose 0.2% to end at 12,272.48. Meridian Energy MEL.NZ was the top gainer with a 3.5% rise.