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Australian three-year bonds weaker

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AAP

2013-02-22

Australian three-year bond futures prices are weaker following positive comments about the economy from the Reserve Bank.

At 1630 AEDT on Friday, the March 10-year bond futures contract was trading at 96.485 (implying a yield of 3.515 per cent), unchanged from Thursday.

The March three-year bond futures contract was at 97.100 (2.900 per cent), down from 97.130 (2.870 per cent).

RBC Capital Markets fixed income strategist Michael Turner said three-year futures sold off as a result of Reserve Bank of Australia governor Glenn Stevens' twice yearly appearance before the federal parliamentary economics committee.

"We sold off on the back of Stevens. We've had a bit of a rally over the past few sessions, so it was enough to see futures drift off," Mr Turner said.

He said Mr Stevens' comments reduced expectations the central bank would cut the cash rate, currently at 3.0 per cent, in the next few months.

"He was pretty keen to highlight how much they've done already, so markets took that as a sign that they wouldn't mind taking a breather should the data permit."

Mr Turner said the key local driver for bond markets next week would be the release of capital expenditure data for the December quarter on Thursday.