The bond market is stronger after a rally on the release late last week of weaker than expected US employment data.
The unemployment rate dropped to a six year low of 5.8 per cent as the number of jobs rose by 214,000 in October, but that was fewer jobs than expected.
“Payrolls were pretty good but not as good as the market had hoped, we got a pretty firm rally immediately on the release of that data,” UBS interest rate strategist Matthew Johnson said.
The local bond market traded in a tight range, getting some support from weak Chinese economic data and Australian housing finance figures, he said.
“The Australian data wasn’t great but neither was the Chinese data, it’s a very modest move,” he said.
Chinese inflation was unchanged at a near five-year low of 1.6 per cent in October, and the number of home loans approved in Australia in September fell 0.7 per cent, while the value of those loans rose 2.3 per cent.
At 1630 AEDT on Monday, the December 2014 10-year bond futures contract was trading at 96.700 (implying a yield of 3.300 per cent), up from 96.625 (3.375 per cent) on Friday.
The December 2014 three-year bond futures contract was at 97.440 (2.560 per cent), up from 97.380 (2.620 per cent).
Mr Johnson expects equity markets to be the main driver for bond markets in the coming days.
“For bonds to really sell off what we need is stronger equities,” he said.