Australian bonds open weaker

Next week's release of $100 billion US Treasury bonds weighed on the Australian bond market as it opened weaker today.

As of 0830 AEDT on the ASX 24, the March 10-year bond futures contract lowered to 94.325 (implying a yield of 5.675 per cent) from Tuesday's 94.340 (5.660 per cent) closing figure while the March three-year bond futures contract went down to 94.620 (5.380 per cent) from 94.650 (5.350 per cent).

UBS Interest rate strategist Matthew Johnson observed that the bonds continued to track US Treasuries on their downward trend overnight and saw nothing on the data that could have actually pulled down bond prices.

Johnson said, "They are such thin markets at the moment. The data wasn't particularly strong, but there was nothing in the data to explain why bond prices actually went down.

"You would have thought they would have gone up, with the data."

Johnson believed next week’s release of $100 billion US Treasuries is putting pressure on the market saying, "With the market so thin, I think that prospective supply is already pulling on the market as dealers begin to pre-hedge.”

The US economy is seen by analysts to have gained momentum near the latter part of the year that implied increased spending in the market as businesses tried to replenish supplies.