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Aust bond prices drop on weak US lead

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AAP

2013-02-01

Australian bond futures prices are lower, following the lead from a weakening US treasury market.

At 1630 AEDT on Friday, the March 10-year bond futures contract was trading at 96.500 (implying a yield of 3.500 per cent), down from Thursday's local close of 96.570 (3.430 per cent).

The March three-year bond futures contract was at 97.130 (2.870 per cent), down from 97.190 (2.810 per cent).

Commonwealth Bank head of debt research Adam Donaldson said local movements had partly reflected those in the US, where 10-year bond prices dropped and yields jumped from 1.99 per cent to 2.01 per cent during Friday's session.

"We've seen a tone of weakness through most of the day," Mr Donaldson said.

"There was some brief respite when positive Chinese PMI (manufacturing) data came out earlier in the day and futures rallied back for a little while then, but they haven't been able to hold that tone overall."

Mr Donaldson said conditions were a thin ahead of the release of US non-farm payrolls figures for January on Friday night AEDT.

"The preference typically, I think, is to be going in square at the moment," he said.

"There is obviously a concern that strong data could extend the sell-off in the US and US traders want to stay away from that risk at the moment."