The Australian bond market is weaker as speculation mounts that the US Federal Reserve might increase its interest rate sooner than expected.

St George senior economist Janu Chan said Australian bond futures prices followed US Treasures higher after a report from the San Francisco Federal Reserve attracted the market’s attention.

“The report said that investors are expecting a slower and more cautious trajectory of rate increases than what Fed officials are expecting,” she said.

The US Federal Reserve has not raised the Federal Funds rate since June 2006 and is not expected to increase it until next year.

At 0830 AEST on Tuesday, the September 2014 10-year bond futures contract was trading at 96.490 (implying a yield of 3.510 per cent), down from 96.560 (3.440 per cent) on Monday.

The September 2014 three-year bond futures contract was at 97.230 (2.770 per cent), down from 97.280 (2.720 per cent).